IT Act change yet to aid MSMEs

Section 43 b (h) of the IT Act allows payments due to MSMEs to be deducted if they were made within a stipulated time; experts note that while this will benefit MSMEs in the long-run, some buyers may choose to source from other suppliers GDP set to grow 8

An intervention introduced in the Union Budget last year to ensure timely payments to micro- and small-scale manufacturing and service units is yet to help them and even hurting some.

Section 43 b (h) of the Income Tax Act says payments due to UDYAN-registered micro- and smallscale industries would be allowed as deduction only if the actual payment was made within the time stipulated in the MSME Act.

If MSMEs have a written agreement with a buyer, payments need to have been made within 45 days.

Otherwise, the payment would be taxed as income.

If a micro or small-scale unit had a written agreement with a medium- or

large-scale industry for supply of components, spares, or any other product or service, the payment should be made by the buyer within 45 days. If there was no agreement, the payment should be made within 15 days.

However, the risk for micro units was that the buyers would prefer to source from suppliers who were not UDYAN-registered, said B. Kandavel, organising secretary of the Federation of Tamil Nadu Powerlooms Associations. For instance, weavers in Tamil Nadu supplying textile products to large buyers got paid once in three months or so. Buyers are now either reducing payment as the credit period has dropped or are preferring unregistered suppliers, he said.

Still, MSMEs would benefit in the long run as they would get payments on time, asserted Anil Bhardwaj, secretary general of the Federation of Indian Micro, and Small & Medium Enterprises.

The intervention will aid MSMEs though it will take time for the system to settle down and may also temporarily affect the working capital of buyers, said V. Thirugnanam, president, Coimbatore District Small Industries Association.

Nirmala Sitharaman

India’s gross domestic product (GDP) is on track to grow by 8% or more in the quarter ending March 31, Union Minister of Finance Nirmala Sitharaman said on Saturday.

The economy is expected to show the same rate of year-on-year expansion for the 2023/24 financial year, Ms. Sitharaman added, citing the impact of improved inflation management and macroeconomic stability.

“Hopefully the fourth quarter... will also have (growth) of 8% or above 8% resulting in 2023/24 having an average growth in GDP of 8% or over 8%,” she said at an event in Mumbai.

GDP data for the January-March quarter is due to be released on May 31.

Asia’s third-largest economy grew 8.4% in the October-December quarter, outpacing the 7.6% logged in the previous quarter.

India’s economy is projected to grow at 7.6% in the current fiscal year, according to the latest government estimates.