Industry Body Urges FM Sitharaman to Retain 45-Day MSME Payment Rule

By siliconindia  |  Monday, July 15, 2024

Industry Body Urges FM Sitharaman to Retain 45-Day MSME Payment Rule
The SME Chamber of India has written a letter to Finance Minister Nirmala Sitharaman, asking for the continuation of the existing 45-day payment stipulation for corporates and other buyers for dues towards MSMEs. This request is against the backdrop of fears floating related to modifications in Section 43B(h) of the IT Act, brought into the Finance Act, 2023.
This Clause proposes to disallow any expense relating to payments made to the MSME vendors beyond the prescribed period of 45 days from the date of acceptance, stipulated in any written agreement. This is an effort to prevent the problem of delayed payment affecting the financial viability of the MSMEs.
In a statement addressed to Sitharaman, the SME Chamber said that this rule was very important for the protection of the MSME sector. "We are opposing any change in the 45-day MSME payment rule; it is an important rule to safeguard the survival of MSMEs until the pressure from corporates and multinationals continues", the statement said.
It has also referred to views expressed by the industry body that Section 43B(h) is a major incentive for ensuring timely payment to firms, which would support the financial health of MSMEs spread over the length and breadth of the country.
It also expressed concern that MSMEs were turning NPAs due to delayed payments by corporates, most of whom eluded the TReDs platform. They warned against deregistration from the Udyam Portal and encouraged sustenance of TReDs for continued transactions.
It also recommended a few other steps to support MSMEs, including extending differential rate of interest scheme loans up to Rs 5 crore for them. The body also recommended that the time limit defining NPAs be increased from the current 90 days to 180 days in case of the MSME sector and help redress financial stress among small businesses.
The industry body has also sought setting up of a task force to sort out different problems and challenges MSMEs have been confronting in getting adequate credit facilities, stating that there should be more proactive methodologies from the financial institutions for augmenting credit to the MSME segment.
It clearly calls for the retention of the 45-day MSME payment rule and all the efforts currently being done in ensuring that the interests of small businesses are safeguarded and that they grow sustainably amid evolving challenges.

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