New Delhi, Apr 30 (KNN) The government is actively considering options to relax the stringent 45-day payment rule for Micro, Small and Medium Enterprises (MSMEs), which came into effect on April 1, 2023.

According to a senior government official, the move to potentially dilute the rule is being contemplated in response to concerns raised by businesses and trade bodies like the Confederation of All India Traders (CAIT), reported Moneycontrol.

They have highlighted that the severity and lack of clarity surrounding the rule could disrupt established business practices and trade.

"The MSME Ministry has had discussions with the Finance Ministry on the 45-day payment rule. Some resolution is likely in the July Budget. There are options. Resolution has to be done, it's in a flux. The MSME Ministry will submit a proposal to the Finance Ministry," the official told.

Among the options being considered are extending the 45-day period to 60 days or even up to six months.

Alternatively, the government is also weighing the possibility of revoking the Income Tax Act amendment that introduced the 45-day rule altogether.

This would allow companies to deduct MSME payments from taxable income regardless of the payment duration.

A third option on the table is to allow businesses to make payments to MSMEs by the due date and still be eligible for income tax deductions, effectively nullifying the importance of the 45-day rule.

The official acknowledged that while the amendment was intended to ensure timely payments to MSMEs, the stringent 45-day payment rule has raised concerns.

"Due to the stringent payment rules, the companies now may ask them to give up their MSME registration in order to do business with them," the official said.

Any potential relaxation or revocation of the rule is expected to be addressed in the Union Budget, which will be presented after the upcoming elections.

(KNN Bureau)