Introduction:
This article addresses the crucial aspects of paying MSME registered vendors within the stipulated 45 days as mandated by the Income Tax Act. It outlines the due dates for MSME vendor invoices based on payment terms and emphasizes the necessity of timely communication with vendors for UDYAM registration. The article also highlights the implications of the Finance Budget 2023 amendment, introducing disallowance for unpaid MSME invoices.
As per Income Tax Act, we have to pay to MSME Registered Vendor / Supplier companies within 45 days.
What is DUE DATE of the MSME Vendor INVOICE?
If the terms of payment are mentioned in the invoice, then the mentioned due date, or 45 days from the day of delivery, whichever is earlier.
If the terms of payment are not mentioned in the invoice, then 15 days from the date of delivery.
Communicate with all vendors to understand whether they are registered under UDYAM or not and obtain their UDYAM registration certificate. (send mails to all Vendor)
Identify invoices that are overdue and Pay them before 31st March’2024 to avoid disallowance in income tax of the unpaid invoice.
MSME Means:-
(i) a micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
(iii) a medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
In the Finance Budget of 2023, a new clause was introduced in Income Tax Act which mentioned that any amount which is not paid to a MSME within the due date of the invoice will be disallowed in that year. It will be allowed only in the year of payment.
WHAT IS MSME?
MSME stands for Micro, Small, and Medium Enterprises. They can be engaged in manufacturing, trading or service industry.
To claim the benefits and protection offered to MSMEs, registration as an UDYAM enterprise (old name Udyog-Aadhaar) is specifically required. Some of the benefits of UDYAM registration are subsidies, preference in government procurement, technology upgradation support, reduced interest rates, interest for delayed payments, etc.
Conclusion: In conclusion, adherence to MSME payment regulations is imperative for businesses to avoid income tax disallowance. Timely communication, identification of overdue invoices, and understanding the nuances of the Finance Budget 2023 amendment are essential. UDYAM registration stands as a key factor for MSMEs to access benefits and protection. By prioritizing compliance, businesses can navigate the complexities of MSME payments and foster mutually beneficial relationships with their vendors.
Author Bio
Dear Sir, Our Company is registered under MSME & is a small company, can our Company also need to pay other MSME (any category) within 45 days.
Regards