The government has revised the MSME payment terms 2024. 1 April 2024 onwards, companies will have to complete all payments to MSMEs within 45 days of receiving the goods.

In case of delayed or deferred payments, the amount due to MSMEs will be considered as ‘profits’ and taxed accordingly (i.e., no claim to expense deductions). 

*New tax regulation |The Finance Act, 2023 introduced Section 43(B)H in the Income Tax Act

This move is expected to benefit MSMEs to: - Receive payments within 45 days - Reduce delayed payments - Increase cash flow

Concerns have been raised around the revised timelines and implementation date. This is because of inadequate awareness and clarity (e.g., on how to treat existing contracts, etc.).

Additional time has been requested, for industry readiness and adaptation. This will ensure hassle-free implementation of the new 45 day payment rule.

The government is reconsidering pushing the implementation date to April 2025. This will give all stakeholders time to prepare and adapt.

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