Indian trade body challenges 'discriminatory' Section 43B(H) in SC

16 Apr '24

2 min read

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Indian government passed Section 43B(H) in the Finance Bill 2023 to safeguard micro and small enterprises (MSEs) from delayed payments.
Nevertheless, a Supreme Court petition by The Federation of All Indian Vyapar Mandal challenges its constitutionality, arguing it discriminates against MSEs by imposing a 45-day credit limit, favouring medium industries.

Indian government recently passed Section 43B(H) of the Income Tax Act in the Finance Bill 2023 to protect micro and small enterprises (MSEs) from delayed payments by buyers. However, MSEs do not see it in their interest, as evidenced by a recent petition made in the Supreme Court to challenge the provision. An Ahmedabad-based trade body, The Federation of All Indian Vyapar Mandal, has challenged the constitutionality of this provision, arguing that it unfairly discriminates and is detrimental to MSEs in the country.

The provision places an undue burden on MSEs, compelling them to strictly adhere to a 45-day credit limit, the petition said. The section creates a classification among manufacturers regarding the credit facility offered to buyers. Micro and small enterprises cannot extend credit to buyers beyond 45 days, whereas medium and large enterprises face no such restrictions and can offer any credit line as they wish.

The petition claims that this provision unfairly disadvantages MSEs by favouring medium and large-scale industries. Such discrimination may lead small-scale industries to lose market share to their larger competitors. The petitioner argued that Section 43B(H) infringes upon the fundamental rights of MSEs to conduct business on their own terms and grant credit as they wish. The trade organisation has challenged the constitutionality of the section, stating it has a detrimental impact on the entire business community. The Federation, which represents industries including textiles and chemicals based in Gujarat, has therefore raised issues related to MSEs from the state in its petition.

It is important to note that although the provision was added to protect the interests of MSEs in the country, trade and industry organisations representing MSEs did not support the payment rule. They feel that such a provision may harm MSEs as buyers might turn to larger suppliers who can offer a more extensive credit limit.

Fibre2Fashion News Desk (KUL)

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