Budget: Exempt us from 45-day payment rule or extend deadline, say MSMEs

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The industry representatives of the trading, food, and garment industry on Friday asked for either an exemption from the 45-day payment cycle for micro, small and medium enterprises (MSMEs) or an increase in the time limit to 60 days during the pre-budget consultations with the Union Finance Minister Nirmala Sitharaman on Friday.

“Some people say that a 45-day payment is good. But some trading, food, and garment industries said 45 days should be exempted for them. They demanded that either it should be the older one or they should be given up to 60 days,” said Vijay G Kalantri, President of the All India Association of Industries (AIAI).

Sanjay Goenka of the Bihar Industries Association said the 45-day payment window was hotly debated, and they have contributed to the consultative process on the subject.

In last year’s budget, the government introduced a new clause in the Income Tax Act to tackle the issue of delayed payments faced by MSMEs, which negatively affects their working capital and business growth. Effective from April 1, 2024, with the 2024-25 assessment year (i.e., the financial year 2023-24), the new clause stipulates that expenses for buyers on invoices from micro and small enterprises can only be claimed if paid within 45 days where an agreement exists, and within 15 days if there is no agreement, in the year of actual payment rather than the year the expense was incurred.

Kalantri further added that they have also demanded that credit support should be enhanced for MSMEs. “SIDBI should be entrusted to become a full-fledged bank to fund MSMEs and priority sector lending should be increased for MSMEs. We have also asked the FM that the tax rates for MSMEs should be brought down to 20 per cent,” he added.

Goenka said: “We discussed reducing the cost of capital for MSMEs, simplification of rules, and the need for a single-window for MSME-related licences.”

Sandeep Kishore, President of the Federation of Indian Micro and Small & Medium Enterprises (FISME), said that they sought a reduction in bank lending rates to MSMEs. “We have also discussed building export preparedness as exports to the West are expected to grow from South East Asian markets,” he said.

Kishore further added that FISME is convinced of fiscal discipline and supports the enforcement of the 45-day payment compliance.