Payments to Micro & Small Enterprises under MSME – Section 43B

Introduction: Delve into the significant amendments in Section 43B concerning payments to Micro & Small Enterprises (MSME) under the MSME Act. Applicable from April 2024, these changes impact the due dates, eligibility for deductions, and compensatory interest. The content includes a detailed flowchart presentation simplifying the comprehension of Section 43B for enhanced clarity.

Payments To Micro & Small Enterprises Under Income Tax Act – Section 43B

1. Applicable from 1st April 2024, so applicable for any sum payable as on last day of FY 2023-24.

2. Applicable to only Micro Enterprise (Investment < 1 Cr, Turnover < 50 Cr) or Small Enterprise (Investment < 10 Cr, Turnover < 50 Cr) as per MSME Act & not Medium & Large enterprises.

3. Applicable to only supplier manufacturers or service provider, so purchase from traders would be outside the purview of these amendments.

4. Micro and small enterprises are also advised to mention a note on the invoice issued by them indicating that they are registered as micro or small enterprise under MSME Development Act, 2006.

5. Payment should be made within 15 days from the date of acceptance or deemed acceptance (delivery date) of the goods or services by a buyer.

6. If a buyer is entering into an agreement with MSME supplier, the due date of payment cannot exceed 45 days from the date of acceptance or deemed acceptance of the goods or services by a buyer.

7. If buyer fails to make payment within the dates mentioned as above then the sum payable will be ineligible for the deduction under income tax act.

8. If compensatory interest paid to MSME for delayed payments it is also disallowed under income tax act.

9. In case any defect in goods or deficiency in service is noticed, then an objection in writing should be made within 15 days. Date of removable of objection by the vendor should also be kept in record as counting of due date will start from this date.

10. Status of the supplier has to be checked on the date of transaction.

11. If the supplier on the date of transaction is not holding the registration/memorandum and is not covered under the MSMED Act, it can’t claim benefits with subsequent registration

12. In case goods supplied before 31st March, 2024 & payment is made after 1st April 2024 but within the time limit specified above then still deduction is allowed for FY 2023-24.

SECTION 43B PRESENTATION – CA AMOL KASAT

Conclusion: Staying abreast of amendments is crucial for businesses, especially concerning MSME payments. The modified Section 43B outlines specific criteria, timelines, and implications for deductions. The accompanying flowchart presentation by CA Amol Kasat serves as a valuable visual aid for a comprehensive understanding. Navigate the intricacies of Section 43B effectively, ensuring compliance with the latest regulations.