In a pivotal move aimed at bolstering the financial stability of Micro, Small, and Medium Enterprises (MSMEs), the government introduced a groundbreaking amendment in the Finance Act of 2023. This amendment, through the insertion of clause (h) in Section 43B of the Income Tax Act, was designed to combat the perennial issue of delayed payments to MSMEs, ensuring they receive timely compensation for their services and goods. Originally slated to come into effect from April 1, 2024, this clause mandates that expenses incurred on purchases from MSMEs would only be deductible if the payments are made within 45 days of agreement, or within 15 days in the absence of one.
However, in a recent development, sources have revealed a proposed postponement that would see the implementation of this crucial clause delayed by a full financial year, now expected to take effect from April 1, 2025. This delay offers a respite for businesses, granting them additional time to adjust their operational frameworks to comply with the new regulations, ensuring a smoother transition to the new payment protocol.
While this postponement may seem like a setback in the fight against the delayed payment culture plaguing MSMEs, it presents a silver lining. It affords all stakeholders - the government, businesses, and MSMEs themselves - a crucial period for preparation and advocacy, ensuring that when the clause is eventually implemented, it is done so effectively and achieves its intended goal of fostering a more equitable business environment. This delay is not a denial but a deferred promise of a new dawn for MSMEs, where timely payments become the norm, enhancing their operational efficiency and financial health.
