New Delhi, Feb 28 (KNN) The finance ministry is currently reviewing a proposal to adjust the new income tax regulation, which mandates businesses to settle payments to Micro, Small, and Medium Enterprises (MSMEs) within a 45-day timeframe.

Some businesses are advocating for a postponement of the provision by a complete fiscal year, while others are urging for an extension of the 45-day limit, reported BT.

According to sources familiar with the matter, the department of revenue is evaluating the proposal to determine the feasibility of any alterations. Although the new rule is slated to be effective from April 1, 2024, numerous businesses are requesting a deferment until April 1, 2025.

Concerns surrounding the implementation of this regulation are multifaceted. Certain segments of MSMEs, particularly those in industries like textiles, fear that the new rule may disrupt their relationships with suppliers and buyers, as many transactions in these sectors operate on a credit system. Others express apprehension regarding the readiness of their systems to comply with this provision.

The objective behind this amendment, introduced through the Finance Act 2023, is to encourage prompt payments to micro and small enterprises.

It incorporates a new clause (h) in section 43B of the Income Tax Act, stipulating that any overdue payments to MSMEs beyond the specified 45-day limit outlined in section 15 of the MSME Development Act 2006 will only be eligible for deduction upon actual payment. Failure to adhere to the prescribed time limit will result in tax liability for the buyer.

Recently, the Confederation of All India Traders (CAIT) wrote to Finance Minister Nirmala Sitharaman, urging for the suspension of the provision's implementation until sufficient clarification and information dissemination are achieved nationwide.

CAIT further appealed for a postponement of the law's enforcement from April 1, 2024, to April 1, 2025, providing traders with a one-year deferral period. They expressed concerns about adverse effects on micro and small enterprises, suggesting that the industry may favour working with medium enterprises instead.

(KNN Bureau)