SMEs divided over impact of new 45-days payment rule. Is it a boon or bane?

The new 45-day payment rule for SMEs, effective April 2024, aims to ease working capital issues. While some SMEs welcome it, others fear adverse impacts on their businesses

In February 2023, Finance Minister Nirmala Sitharaman amended the Income Tax Act as part of the FY24 budget to ensure payments to the Micro and Small Enterprises (SME) sector for goods and services purchased within 45 days. The amendment, effective from April 2024, aims to address the working capital shortages faced by SMEs, which play a crucial role in job creation and exports.

However, the amendment has divided the industry. Certain sectors have opposed the 45-day payment cycle, demanding reconsideration in the final Budget for FY25 to be presented in the second half of July. While most