The Finance Ministry is considering a significant change in the implementation timeline for the 45-day payment rule aimed at benefiting micro, small, and medium enterprises (MSMEs). According to sources, the enforcement of Rule 43B (h) under the Income Tax Act, which mandates payments to MSMEs within 45 days, is likely to be postponed.
Background Story
The Finance Act of 2023 introduced clause (h) in Section 43B of the Income Tax Act. This amendment was specifically designed to ensure timely payments to MSMEs. By requiring payments within 45 days, the government aimed to alleviate financial stress for these enterprises and enhance their liquidity.
Rationale for Postponement
While the original intention behind Rule 43B (h) was commendable, practical challenges have arisen during its implementation. MSMEs, often operating on tight budgets, faced difficulties in enforcing prompt payments from their clients. The pandemic-induced economic disruptions further exacerbated these challenges.
In light of these realities, the Finance Ministry is now contemplating a delay in the enforcement of this rule. The proposed postponement will provide businesses, especially MSMEs, with additional time to adapt to the new payment norms. It also acknowledges the need for a more gradual transition to avoid any adverse impact on the sector.
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Implications
The potential postponement until April 2025 will allow stakeholders to prepare adequately. MSMEs can review their internal processes, negotiate better terms with buyers, and strengthen their financial resilience. Additionally, it will give the government an opportunity to address any operational hurdles related to the implementation of the rule.
Industry Response
Industry experts and MSME representatives have welcomed this development. They believe that a phased approach will strike a balance between the urgency of timely payments and the practical challenges faced by businesses. The extended timeline will also allow for better awareness campaigns and capacity-building initiatives.
Conclusion
As the Finance Ministry deliberates on the final decision, businesses across the country eagerly await clarity on the revised timeline. The proposed postponement reflects a pragmatic approach, recognizing the complexities involved in transforming payment practices. For now, MSMEs can focus on their recovery and growth, knowing that the government is actively addressing their concerns.
Disclaimer: This article is based on information available as of March 4, 2024, and any subsequent developments may not be reflected here. Readers are advised to stay updated with official announcements from the Finance Ministry. News resources are given below.
News Resource :- cnbctv18.com
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