Indian traders urge FM to implement new payment rule in phased manner

Trading activities in India have been hindered to some extent in recent days due to the implementation of Section 43B(h) of the Income Tax Act 2013. As the current fiscal 2023-24, during which the payment rule has been implemented, is ending rapidly, trading activities have slowed down across the country. Trade organisations have approached finance minister Nirmala Sitharaman and demanded the implementation of the rule in a phased manner so that traders can adopt the new practice without disrupting their business.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

Although the payment rule came into effect on April 1, 2023, with the Finance Act 2023, trade and industry did not take notice until the end of the first three quarters of the current fiscal. According to Section 43B(h), any sum payable by a taxpayer to a micro and small enterprise beyond the time limit specified in Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act shall be allowed only in computing the income of the previous year in which the sum has been actually paid. Therefore, taxpayers (buyers) will face difficulties in the next assessment year 2024-25, which will start from April 1, 2024.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

Several trade and industry organisations have approached the finance minister for relief. A large number of trade organisations like the Clothing Manufacturers Association of India (CMAI), Southern Gujarat Chamber of Commerce & Industry, and Bangalore Wholesale Cloth Merchants' Association demanded the finance minister implement the rule in a phased manner.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

Rajesh Masand, president of CMAI, urged the finance minister to immediately withhold the implementation of the new rule. “The government should amend the rule to provide a credit time limit of up to 90 days for the year ending March 31, 2025. The credit time limit may be reduced to 60 days for fiscal 2026 and 45 days for the fiscal 2027. It will provide enough time for traders to adopt the new payment rule. It cannot be implemented all at once.”

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

Trade organisations said that although the government may have brought the provision with good intentions to help micro and small businesses, it lacks industry-specific considerations, potentially leading to unintended and adverse consequences across various sectors. Implementing a stringent credit policy without a thorough industry-specific study may result in far-reaching negative effects.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

They said that the new rule may hinder the growth of smaller players. Medium players could exploit the opportunity to offer longer credit terms. In the textile industry, varying credit periods for different stages of production make a one-size-fits-all credit policy impractical and detrimental. Credit, being a mutual and personal agreement, involves market inquiries, credit checks, and discussions between buyers and sellers. Interfering with these terms may create a general sense of mistrust between business partners.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

The focus on outstanding dues on March 31 will encourage customers to avoid transactions with registered micro and small traders in the last quarter, which will lead to potential stockpile issues. Buyers may prefer larger suppliers to mitigate compliance issues, even at a slightly higher cost, causing SMEs to suffer further in February and March every year.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.

Textile exports, heavily reliant on credit for working capital balance, will face challenges and uncertainties due to this provision. Organisations requested the government to reconsider delaying or scrapping the implementation of Section 43B(h) to safeguard the interests of businesses, especially SMEs, and preserve the trust and harmony built over the years.

 

Indian traders seek phased implementation of new payment rule to avoid business disruption. Concerns arise over Section 43B(h) of the Income Tax Act 2013, impacting trading activities. Trade organisations urge FM Sitharaman for relief, proposing credit time limits and industry-specific considerations to safeguard SMEs and preserve trust in the market.