Industry bodies such as Confederation of All India Traders (CAIT) and Clothing Manufacturers Association of India (CMAI) have urged the Centre to postpone implementation of the MSME payment amendment in the income-tax.
According to 44 (b) (h), any payment made to registered micro, small or medium enterprises beyond the time limit specified of 45 days of receiving goods or services will not be recognised as an expense and added to the profit of the company for taxation purposes. This will be implemented from Assessment Year 2024-2025 from April 1.
In a statement, Praveen Khadelwal, Secretary General, CAIT said, “We acknowledge that this a progressive move by the government is to ensure timely payments are made to the MSME sector within 45 days to maintain uninterrupted cash flow for traders. However, given the lack of clarity surrounding the applicability of the law to traders and other related provisions, we have urged for more time for its implementation until sufficient clarification and information dissemination are achieved nationwide.” CAIT has appealed to the government to postpone the implementation of this law from April 1, 2024 to April 1, 2025 to provider traders with a one-year deferral period.
In a statement, CMAI, said, “The protracted issue of delayed payments within the MSME sector has long hindered its growth, and it is commendable that the Government has taken steps to tackle this systemic challenge. Despite the government’s sincere efforts to alleviate the challenges faced by the MSME sector, the unique intricacies of the garment sector have given rise to apprehensions. Issues such as the cancellation of orders from retailers have started to emerge, raising concerns within the industry.”
The industry body has also urged the government to implement it over three years. It has also urged that payments made by on MSME entity to another entity from the ambit of this norm.
The industry body said that in the domestic garment industry, the standard payment cycle ranges from 90-120 days. “In response to this amendment, numerous retailers have taken immediate action by issuing “stop supply” directives to their suppliers. Moreover, a significant number of retailers are contemplating the return of unsold merchandise to the manufacturers, thereby absolving themselves of the obligation to pay for these items,” said Rahul Mehta, Chief Mentor, CMAI.