MSMEs Seek Extended Payment Period from NDA Government

The Federation of All India Vyapar Mandal (FAIVM) plans to petition the new NDA government to extend the payment period for MSMEs from buyers to 180 days, up from the current 45 days. FAIVM President Jayendra Tanna told FE Aspire that changes to Section 43B of the Income Tax Act, which address the delayed payments crisis for MSMEs, are expected to be repealed in the full budget in July, as indicated by Finance Minister Nirmala Sitharaman in the second five-year term of Narendra Modi’s government.

“The new government should implement a uniform policy requiring payments to suppliers of goods and services within 180 days from the date of invoice issuance, instead of the current 45 days,” Tanna stated.

Currently, traders, including wholesale and retail traders, face limitations on raising bank credit under priority sector lending norms. There is no mandate for their buyers to pay within 45 days to qualify for tax benefits. Consequently, Tanna argued that the new government should extend MSME registration benefits, including the delayed payment mandate, to traders with Udyam registration from the MSME Ministry.

“The revised payment policy will also address GST (Goods and Services Tax) regulations,” Tanna added.

In May, during discussions with MSMEs and local industries in Ludhiana, Sitharaman mentioned that the government would repeal changes to Section 43B of the Income Tax Act in the full budget if MSMEs prefer to operate without the current 45-day payment limit from their buyers. “If MSMEs want relaxation in payment terms beyond 45 days—whether 150 days or a year—we can easily revert to the original rule,” Sitharaman had said.

On May 6, the Supreme Court rejected a plea by FAIVM, the Madras Merchants and Manufacturers Association, and the Confederation of West Bengal Trade Associations seeking an interim stay or annulment of the new provision in the Income Tax Act. The government introduced a new clause (h) on April 1, 2024, allowing MSME buyers to claim expenses only if payments were made within 45 days in the year of payment, rather than the year the expense was incurred.

On Friday, President Droupadi Murmu invited Narendra Modi to form a government at the Center. Modi is scheduled to be sworn in as India’s Prime Minister at 6 p.m. on June 9.

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