Section 43B(h) – Sum Payable to MSE
Tax Impact on Payment to MSE [Amendment in Section 43B(h)]
Income of Business and Profession
Objective: To promote timely payment to Micro and Small Enterprises (MSE) [Not covered: Medium Enterprises].
Any sum payable to MSE is allowed as a deduction on a payment basis if paid after the time limit specified in Section 15 of the MSMED Act 2006.
Section 15 of the MSMED Act 2006:
- Where any supplier supplies goods or renders services to any buyer, the buyer shall make payment on or before the agreed date in writing or, in the absence of such an agreement, before the appointed day.
- The agreed period between the supplier and the buyer shall not exceed 45 days from the day of acceptance or deemed acceptance.
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Section 43B(h) – Sum Payable to MSE
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Time Limit u/s 15 of MSMED Act 2006:
No Written Agreement: Payment within 15 days
Written Agreement: Payment within 45 days (Maximum)
Note: Sum payable to MSE till 31st March 2023 will not be covered under this amendment.
Definition of Enterprises
- Enterprise:
Entity engaged in the production or manufacturing of goods specified in the 1st Schedule of the Industries (Development and Regulation) Act 2015.
Entity engaged in providing or rendering services.
Categories:
- Micro Enterprises: Investment in Plant & Machinery or Equipment < ₹1 crore and Annual Turnover < ₹5 crore.
- Small Enterprises: Investment in Plant & Machinery or Equipment < ₹10 crore and Annual Turnover < ₹50 crore.
- Supplier: MSE that has filed a memorandum with the authority referred to in Section 8, i.e., Udyam Registration.
- The period of 45 days or 15 days shall be counted from the date of acceptance or deemed acceptance.
- Appointed Day: The day immediately after the expiry of 15 or 45 days from the date of acceptance or deemed acceptance.
- Day of Acceptance:
(a) The day of actual delivery or rendering of goods/services.
(b) If any objection is made in writing by the buyer regarding acceptance within 15 days of delivery, the day on which such objection is removed by the supplier.
- Day of Deemed Acceptance:
If no objection is made in writing by the buyer within 15 days from the delivery of goods or services, then the day of actual delivery of goods or rendering of services.
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| Date of Acceptance | Credit period | Due date of Payment | Date of Payment | Allowable year | Remark |
|---|---|---|---|---|---|
| 15.4.2023 | 30 Days | 14.05.2023 | 13.05.2023 | 2023-24 | |
| 15.04.2023 | 60 Days | 29.05.2023 | 15.07.2023 | 2023-24 | Maximum credit period 45 days irrespective of agreement |
| 15.04.2023 | No Agreement | 29-04-2023 | 31st March 2024 | 2023-24 | Allowed in year in which payment made |
| 25.03.2024 | 60 Days | 8th May 2024 | 5th May 2024 | 2023-24 | Paid within time allowed |
| 25.03.2024 | 60 Day | 8th May 2024 | 10th May 2024 | 2024-25 | Not paid within time allowed so allowed in year in which paid. |
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Other Provision of the MSMED Act 2006
Inclusion in Financial Statement [Section 22 of MSMED Act 2006]
If a buyer is required to get annual accounts audited under any law, the buyer shall furnish the following details in the annual statement of accounts:
1. The principal amount and interest due (shown separately) remaining unpaid to any supplier at the end of each accounting year.
2. The amount of interest paid by the buyer in terms of Section 16, along with the amount of payment made beyond the appointed day during each accounting year.
3. The amount of interest due and payable for the delay in payment beyond the appointed day but without adding the interest specified under this Act.
4. The amount of interest accrued and remaining unpaid at the end of each accounting year.
5. The amount of further interest remaining due and payable in succeeding years until the interest dues are paid to the small enterprise.
Other Provisions of MSMED Act 2006
Interest is not to be allowed as a deduction from income [Section 23 of MSMED Act 2006].
Notwithstanding anything contained in the Income-tax Act, 1961, the amount of interest payable or paid by any buyer, under or following the provisions of the MSMED Act, shall not, for computation of income under the Income-tax Act, 1961, be allowed as a deduction.
Overriding effect. [Section 24 of MSMED Act 2006]—
The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
Sample Letter to Suppliers for MSME Registration Certificate
Dear Vendor,
As part of our ongoing commitment to comply with regulatory requirements and support the growth of Micro, Small, and Medium Enterprises (MSMEs), we are reaching out to all our vendors to update our records in accordance with the MSME Act.
We kindly request that you submit your MSME registration certificate, if you are registered as an MSME, within the next 15 days from the date of this email. This will enable us to provide the necessary support and benefits that are accorded to MSMEs under the relevant regulations and policies.
Please email a copy of your MSME certificate to ensure that the document is legible and the registration number is clearly visible, and the updated category is clearly defined in the certificate.
If we do not receive your MSME certificate within the specified timeframe, it will be deemed that your organization is not registered oris not eligible as an MSME.
We understand that not all businesses may be registered as MSMEs and this request is only applicable to those who are currently registered under the MSME Act.
We appreciate your prompt attention to this matter and your continued partnership. Should you have any questions or require assistance, please feel free to contact
Thank you for your cooperation
Regards
Authorized signatory
Sample Reply to Buyer Regarding MSME Registration Certificate
Dear Vendor,
I hope this message finds you well.
We are writing in response to your request for MSME registration details. We would like to inform you that our organization is not currently registered under the Micro, Small, and Medium Enterprises (MSME) Act.
As such, we do not possess an MSME registration certificate and are not eligible for any benefits or support related to MSMEs.
We appreciate your attention to this matter and value our ongoing partnership. Should you require any additional information or clarification, please feel free to reach out to us.
Thank you for your understanding.
Best regards,
Company Name
(Seal and Signature)
Thank you for your cooperation
Conclusion
The amendment in Section 43B(h) ensures timely payments to Micro and Small Enterprises, which helps businesses maintain compliance and avoid disallowances. It also promotes financial discipline and ensures smoother cash flow for MSMEs. Businesses should carefully track their payment timelines to avoid penalties and non-deduction of expenses. If you are a business owner, timely MSME registrations in Rajasthan can help you avail the benefits under the MSMED Act.
Why Choose E Accountax Manager?
At E Accountax Manager, we provide expert guidance on taxation, compliance, and Virtual CFO services in Jaipur. Our professionals help businesses ensure regulatory compliance and optimize tax benefits. Whether you need assistance with MSME compliance, shop act registration in Rajasthan, or income tax return filing services, our team ensures smooth and hassle-free financial management. Contact today at E Accountax Manager to stay compliant and maximize your business potential!
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