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Chartered Accountants Association, based in Jalandhar and led by CA. C K Koul as Chairman and CA. Ashwini Jindal as General Secretary, has addressed a letter to the Honorable Minister for Finance, Government of India, expressing concerns over the proposed amendment to Section 43B of the Income Tax Act, 1961. The association acknowledges the government’s aim to ensure timely payments to Micro, Small, and Medium Enterprises (MSMEs) but highlights potential challenges such as difficulty in identifying MSE status, reasons for payment delays, tax implications, cash flow issues, and the ripple effect on the supply chain. They propose amendments including an extension of the payment period, limiting applicability to Tax Audit assesses, extending proviso benefits, and exempting inter-se transactions between MSEs to mitigate adverse impacts while achieving the intended goal.

They commend the Minister for Finance’s leadership and express optimism about India’s future under Prime Minister Modi’s governance, while respectfully urging a reconsideration of the amendment to Section 43B. The letter concludes with a plea for sympathetic consideration of their representation, signed by CA. Ashwini Kumar Jindal, General Secretary, with contact details provided for further correspondence.

(C R Building & Model Town Rout Jalandhar)
For correspondence care:- CA. Ashwani Jindal, General Secretary,
498-LA, Model Town, Near Geeta Mandir, Jalandhar
Email: casassociation.jal@gmail.com, Mobile: 9376063350

CA. C K Koul, Chairman
CA Ashwini Jindal, General Secretary

June, 11, 2024

To. Honorable Minister for Finance
Govt of India
New Delhi.

Respected Madam,

Sub. Representation against Proposed Amendment In Section 43B of the Income Tax Act, 1961, Detrimental to MSME Sector.

We would like to bring to your kind notice that The Chartered Accountants Association is representing Chartered Accountants is a constituent body under the societies act. The functions of the Association include holding of talks, workshops, seminars and conferences on topics of professional interest with a view to help the members keep themselves abreast of the developments in the fast-changing scenario, to represent members before various authorities etc.

Representation against Proposed Amendment In Section 43B of Income Tax

First of all, I congratulate you co your second term as Union Finance Minister. Under the able leadership of Prime Minister Modi, the Country has achieved various milestones and we are hopeful that during Modi 3.0, India will become a global leader.

Madam, during your recent visit to Ludhiana, you assured us of reconsidering the deferment of the proposed amendment in Section 43B of the Income Tax Act, 1961. I am writing to express the concerns of the business community regarding this proposed amendment., which we believe poses a significant threat to the micro, small, and medium enterprises (MSME) sector. While we understand the governments noble intention of ensuring timely payments to MSMEs, we fear that the current proposal may inadvertently impose severe challenges on both buyers and suppliers within this vital sector of our economy.

The proposed amendment stipulates that deductions for  purchases from Micro and Small Enterprises (MSEs) will only be permitted upon actual payment or within the timeframe specified by the Micro small and Medium Enterprises Development  Act (MSMED) While we acknowledge the importance of promoting prompt payments we foresee several practical issues that could arise.

1. Difficulty in Identifying MSE Statue: It may be challenging for buyers to accurately determine the MSE status of their suppers. potentially leading to disputes and litigation.

2. Reasons for Delayed Payments: Various legitimate reasons for delayed payments exist, including  issues related to product quantality, quality discrepancies, contractual deputes, or even temporary liquidity constraints.

3. Tax Implications: Delayed payments may result in the taxation of unrealized income, unfairly burdening buyers and potentially hindering their ability to fulfill tax obligations.

4. Cash Flow Challenges: Estimating income at year-end for tax purposes could disturb cash flow and impose financial strain on businesses.

5. Ripple Effect on the Supply Chain: Delays in payments could have a cascading effect on the entire supply chain, exacerbating working capital challenges and increasing the risk of bankruptcy for MSEs.

6 Additional Financial Burdens: In addition to interest and tax labilities businesses may face increased financial pressure, further compromising their viability.

These challenges have the potential to deter businesses from engaging with MSEs, resulting in tax arrears and legal disputes. Therefore we respectfully, urge a reconsideration of The proposed amendment. Alternatively, we propose the following amendments to addressees concerns raised.

1. Extend the Payment Period: Consider extensile the payment period from the existing 45 days to 1 year or 6 months to provide businesses wish more flexibility and breathing room.

2 Limit Applicability: Restrict the provision to assesses under Tax Audit to minimize me impacts on small businesses.

3. Extend Proviso Benefit: Extend the benefit of the provision to Section 43B to include MSE payment, ensuring parity with other deductions.

4. Exempt Inter Se Transactions: Exclude transactions between MSEs from the ambit of the provision to prevent unintended consequences.

We believe that these proposed modifications will help mitigate the unintended adverse effects on businesses while still achieving the intended goal of promoting timely payments to MSMEs Your sympathetic consideration of our representation is earnestly requested.

Yours sincerely,

(CA Ashwini Kumar Jindal)
General Secretary
M- 9876063350


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July 2024