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The said section, part of the Income Tax Act, mandates payments to micro, small, and medium-sized enterprises (MSMEs) within 45 days. Sources reveal that the Finance Ministry is mulling over pushing back the application of this rule for an entire fiscal year. Currently set to be enforced from April 1, 2025, the provision was introduced via the Finance Act of 2023 to ensure timely payments to MSMEs.
Under the amendment, entities are required to settle payments within 45 days, failing which the pending dues would be treated as income and subjected to taxation.
The decision to potentially postpone the rule's enforcement comes amidst numerous representations from various industries to the finance ministry. Concerns have been raised regarding the tight payment window, citing disruptions to customary practices and instances of order cancellations.
Industry bodies have submitted proposals for amendments to the act or a brief deferment to allow companies more time to adapt.
On February 16, the Ministry of MSME reached out to different SME groups for input on the matter, with organizations asked to provide their perspectives by February 19.
