Centre Likely To Relax MSME Payment Norms in Union Budget 2024
This could potentially undermine the benefits intended for MSMEs and impact their viability.
Centre Likely To Relax MSME Payment Norms in Union Budget 2024: In the upcoming Budget 2024, the Indian government is poised to consider amendments to Section 43B (H) of the Income Tax Act, specifically addressing concerns raised by micro, small, and medium enterprises (MSMEs).
This section, introduced in the Finance Act 2023, mandates that larger corporations pay MSMEs within 45 days to deduct expenses from taxable income, aiming to ensure timely payments to MSMEs.
The proposed relaxation of this mandatory requirement stems from fears within the MSME sector that stringent enforcement could drive larger corporations to seek alternative sourcing avenues outside of registered MSMEs.
This could potentially undermine the benefits intended for MSMEs and impact their viability. MSMEs, which significantly contribute to India's GDP and employment, fear losing business to larger firms or non-MSME entities if their larger clients opt for alternative suppliers to circumvent compliance burdens.
Finance Minister Nirmala Sitharaman previously indicated that any adjustments to these rules would be addressed comprehensively in the upcoming Budget session, responding to representations from MSME stakeholders.
The MSME sector, vital to India's economic fabric, relies heavily on timely payments to sustain operations and growth. Concerns over potential adverse impacts on MSMEs have prompted the government to reconsider the strict enforcement of payment timelines, balancing the needs of MSMEs with broader economic goals.
The outcome of these deliberations will be closely watched, as it could shape the competitive landscape for MSMEs and influence their growth trajectory in the post-pandemic recovery phase. The government's decision, expected during the Budget presentation on July 23, will be pivotal in determining the regulatory environment for MSMEs and larger corporations alike, aiming to foster a more supportive ecosystem for economic resilience and sustainable growth.
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