CAIT seeks 1 year delay in implementation of new MSME payment rule

The new rule of timely payment to MSMEs within 45 days should be postponed by a year or suspended till sufficient clarity is brought to the companies, Confederation of All India Traders (CAIT) said in its representation to the Finance Ministry.

“The new provision in the Income Tax Act aims to enhance financial liquidity for micro and small enterprises (MSMEs). However, there is a need for greater awareness among traders about this beneficial provision and propose a one-year postponement of its implementation. This delay, would allow traders ample time to understand and comply with the law smoothly,” CAIT Secretary General Praveen Khandelwal said in a statement.

CAIT has sought postponement of the implementation of this law from April 1, 2024 to April 1, 2025, to provide traders with a one-year deferral period. The trade body met Finance Minister Nirmala Sitharaman on February 14 to put forward its concern, it said.

According to the Income Tax Law 43B (h) in the Finance Act 2023, in order to ensure timely payments and maintain uninterrupted cash flow, the companies need to make payments to the MSME sector within 45 days. If the companies fail to do so, the amount will be added to their profits on which income tax will have to be paid.