
Finance Minister Nirmala Sitharaman has expressed willingness to reconsider the current 45-day payment rule for micro, small, and medium enterprises (MSMEs) if the industry desires it. Sitharaman emphasized that if MSMEs require an extended payment period, they can submit representations for consideration in the upcoming July budget, which will take place after the elections.
During her interaction with MSMEs and industry in Ludhiana, Punjab, ahead of the last phase of the Lok Sabha elections, Sitharaman also confirmed that tax relief for MSMEs would still be available. However, this relief would be applicable only when payments are made within the current payment timelines. The Minister encouraged MSMEs and the industry to submit representations if they do not want the payment rule amendment and wish to change the route.
The 45-day rule refers to a 2023 budget announcement regarding Section 43B(h) of the Income Tax Act. According to this rule, companies must fulfill their payment obligations to MSMEs within 45 days or forgo tax benefits in that year, starting from April 1, 2024. Outstanding dues were expected to be cleared by March 31, and any unpaid amount beyond this period would be considered as profit and subject to tax. Deductibles would only be allowed after payments are made.
Opinions within industry bodies are divided on the preparedness for this rule. While some players have welcomed the move, others have expressed doubts about its practicality.
Sitharaman also emphasized the need for a strong finance ministerial voice from the state of Punjab and urged the people to vote accordingly. Punjab is set to vote in the upcoming Lok Sabha elections on June 1 as part of the seventh and final phase of voting. The results of the 2024 elections are expected to be announced on June 4.