New Delhi, Mar 5 (KNN) The Indian government is mulling over the deferment of a newly proposed law aimed at facilitating prompt payments to micro and small enterprises (MSEs).

The implementation of the plan, originally scheduled to take effect from April 1, has currently been halted.

A final call is expected to be made during the regular budget session in July, as disclosed by a source to FE.

The objective of the law was to provide much-needed support to small businesses grappling with financial challenges, ensuring a steady cash flow.

Nevertheless, concerns raised by MSEs and traders regarding operational difficulties and the lack of clarity necessitated a reassessment.

The proposed amendment, under Section 43B of the Income Tax Act, emphasises deduction based on actual payment rather than accrual basis, in adherence to the time constraints outlined in Section 15 of the MSME Act.

These time limits stipulate a payment window of 45 days for contractual agreements and 15 days for non-contractual transactions, slated to come into effect from April 1, 2024.

While the provision aims to bolster financial liquidity for MSEs, stakeholders like the Confederation of All India Traders (CAIT) have expressed reservations.

CAIT General Secretary Praveen Khandelwal highlighted the need for clarity on the law's applicability to traders and related provisions.

The CAIT has advocated for a suspension of implementation until comprehensive clarification and nationwide dissemination of information are achieved.

Furthermore, concerns have been raised about the potential adverse impact on MSEs, as the law solely applies to payments to micro and small entities, potentially diverting business away from them towards medium-sized enterprises.

The latest TransUnion CIBIL-SIDBI MSME Pulse Report underscores the importance of credit accessibility, indicating a substantial portfolio growth of 11 per cent amounting to Rs 28.2 trillion across 80 Lakh MSME entities in the July-September 2023 quarter.

(KNN Bureau)