Section 43B of the Income-tax Act 1961 revised last year to address the delayed payments issue faced by small businesses have been endorsed by MSME associations in the country, said Pankaj Chaudhary, Minister of State in the Finance Ministry. Chaudhary informed Lok Sabha on Monday on the issue of payment to SMEs by big companies that “a number of MSME associations have endorsed the intervention introduced in the budget last year to ensure timely payments as being beneficial to the micro and small enterprises (MSEs).”
The MSEs were grappling with the issue of delayed payments, cash flow and the risk of business getting closed due to financial constraints, he said answering the question on the action proposed by the government to resolve the payment issue to SMEs and ensure that their businesses are not adversely affected.
In April this year, a new clause (h) was inserted in Section 43B of the Income-tax Act 1961 to provide that any amount payable by the buyer to a micro or small enterprise beyond 45 days will be allowed as deduction only on actual payment.
Chaudhary added that companies that get supplies of goods or services from MSEs and whose payment to MSEs exceeds 45 days from the date of acceptance also need to submit a half-yearly return to the Ministry of Corporate Affairs stating the amount of payments due and the reasons for the delay.
The MSME Ministry earlier this month had notified that businesses with over Rs 250 crore turnover, from earlier Rs 500 crore, and all central public sector enterprises (CPSEs) need to onboard the invoice discounting platform TReDS by the Reserve Bank of India (RBI) for facilitating the discounting of trade receivables of MSMEs through multiple financiers.
Under the provisions of the MSMED Act, 2006, Micro & Small Enterprises Facilitation Councils (MSEFCs) have been set up in the states/union territories to deal with cases of delayed payments of MSEs.
Chaudhary said so far, 159 MSEFCs have been set up, with more than one MSEFC set up in States like Delhi, Jammu & Kashmir, Karnataka, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.
According to the Samadhaan portal’s data, out of 2.13 lakh applications involving Rs 47,366 crore filed by MSEs so far, 43,069 applications involving Rs 7,085 crore were disposed.
