Federation of All India Vyapar Mandal Vs Union Of India & Ors. (Supreme Court of India)
The Supreme Court (SC), in a recent decision, declined to hear a plea filed by Micro and Small Enterprises (MSEs) challenging the 45-day payment rule under Section 43B (h) of the Income Tax Act. This provision imposes guidelines on the credit extension practices of MSEs, prohibiting them from providing credit to buyers for more than 45 days. Additionally, it mandates that dues owed to MSEs must be settled within this timeframe.
Under this provision:
- Failure to clear dues within the stipulated 45-day period incurs penalties.
- Buyers who are unable to settle their debts with MSEs within the prescribed time frame face the imposition of compound interest at a rate three times the bank rate prescribed by the Reserve Bank of India (RBI).
- Buyers also risk being denied the ability to deduct payments to MSEs from their taxable income.
The SC directed the MSEs to approach the High Court (HC) to seek any relief. The petition was filed by the Federation of All India Vyapar Mandal, representing the interests of MSEs across the country.
This decision has significant implications for small and medium enterprises, and it underscores the importance of timely payments in the business ecosystem.
