Tax tweak that hurt MSMEs likely to get a relook in budget Bengaluru firms gulp more water, vow to reduce usage
Collective consumption increases 11% but water consumed per rupee of turnover goes down
Jain explained that a buyer of MSME goods or services that misses a payment deadline faces a jump in its tax liability during a fiscal year due to denial of the benefit of deduction for the payment liability accrued.
If the deduction is allowed in a subsequent year of payment, the tax liability incurred earlier due to delayed payment does not go away. Besides, it could depress profits in the year that the payment is made. And if income turns out to be negative, in some cases, it could take years for the business to set it off against profits of subsequent years, Jain said.
What counts as timely payment is defined in the Micro, Small and Medium Enterprises Development (MSMED) Act as payment made within 15 days, or within 45 days in case it is backed by a written contract. But in many industries, the payment cycle is longer—three to six months.
The second person said finance minister Nirmala Sitharaman is aware of the concerns raised by small businesses. In response to a question, Sitharaman told a gathering in Jaipur on 16 April that the finance ministry had in 2022-23 made a thorough review to make sure all central public sector undertakings cleared payments to MSMEs and then maintained the 45-day payment cycle, but the finance ministry was not in a position to know about dues to MSMEs from state PSUs or the private sector and, hence, suggestions were sought.
The minister said MSMEs themselves pointed out to the ministry that businesses do not pay within 45 days, and not even within the fiscal year, but they take fiscal benefits by showing it as expenditure. “MSMEs themselves gave that thought to us,” Sitharaman said, referring to how businesses breach the timeline given in the MSMED Act brazenly.
Sitharaman said the Income Tax amendment of 2023 was only meant to make sure the benefit is taken in the year when payment is made. She also pointed out that small businesses are now putting forth the argument that big businesses are shying away from buying from small businesses, with one group even demanding an ordinance, after the Lok Sabha was prorogued ahead of the national elections.
The finance minister did not say what the government would be doing in the full budget, but the second person said the intent of the Income Tax provision, as highlighted by Sitharaman, was to encourage timely payments to small businesses, and that the unintended consequences will be addressed in the next Finance Bill, but it was too early to speak about the specific amendments that may be brought out.
Bengaluru has been grappling with an acute water crisis for the past few weeks. The city’s high concentration of major industries—beyond tech— has set alarm bells ringing, with temperatures set to shoot up further. While it’s not possible to track water usage at all offices across the city, a similar exercise for listed firms headquartered in Karnataka’s capital revealed an 11% collective increase in consumption in 2022-23.
Of the top 1,000 BSE-listed firms by market capitalization, 56 are registered in Bengaluru. Of these, 45 companies had relevant data that was reliably available, which formed part of the analysis.
The top five by revenues showed a 12.3% increase in water consumption in 2022-23, the latest year for which data is available. Public-sector firms reported an aggregate 2.2% growth, and privatesector firms 21%, the analysis showed.
Companies disclosed these numbers in their annual reports under the business responsibility and sustainability reporting (BRSR) guidelines. These trends do not represent the water consumption for only Bengaluru as they have offices or plants across cities and even overseas. Given the size of these companies, this analysis is only a proxy to assess the sensitivities that may guide businesses by virtue of being headquartered in a highly water-stressed city.
That said, the companies in the analysis also saw a rise in volumes of water consumed in specific areas of water stress (based on availability and applicability of the data), which did include offices and plants located in Bengaluru. But there were outliers, too. For instance, AstraZeneca Pharma India Ltd, which is registered in the city, managed 3M India: Aiming for a
25% reduction by 2030
ABB India: "Water recyclability" up by in 2023 (vs 2019)
Biocon: recycling/reuse of treated wastewater in FY23
Bosch: Reducing absolute water withdrawal in regions with water scarcity by by 2025 (over 2017)
United Spirits: Leveraging an "innovative technology" that "draws water from the air"
Declined by 25-50% Declined by 10-25% Declined by 0-10% Increased by up to 25% Increased by more than 25% to reduce water consumption in its Bengaluru facility by around 22%. Hitachi Energy India Ltd was another such entity to do so in its Bengaluru facilities.
The IT sector, where water use is primarily limited to human consumption, saw the sharpest rise of 52% in 2022-23
OUT of the top 1,000 BSE-listed firms by m-cap, 56 have their registered office in Bengaluru
OF these, 45 companies had relevant data that was reliably available
as employees worked from office. This was followed by real estate firms, with a 35% rise in consumption. The segment is believed to have deepened the crisis with booming construction activity.
Companies also saw a similar rise in total water withdrawals from primary
THE top five of these 45 firms, based on revenues, showed a 12.3% rise in water consumption in FY23
Companies such as 3M India Ltd even set targets for reducing water use, while others sought more innovative ways to fulfil their needs: United Spirits Ltd said it was leveraging an innovative technology that draws water from the air. However, a little less than half of the companies in the sample relied heavily on freshwater withdrawals.
Yet another metric to gauge efforts towards efficient water management was water intensity. The analysis showed that in almost twothirds of the companies in the sample, water intensity (water consumed per rupee of turnover) has reduced in FY23, serving as testimony of environmental stewardship even with growing scale of businesses. However, among the top six by revenue, only two companies saw a decline: United Spirits and Bharat Electronics saw over 12% fall in their water intensity.
PSUS reported an aggregate 2.2% growth, while private firms increased their water use by 21%
freshwater resources like groundwater—made possible in several cases through rainwater harvesting, recycling and reuse of treated wastewater.
For instance, in Aster DM Healthcare Ltd, 24% of water consumption was from recycled and rain water in 2022-23.