45-day MSME payment rule comes into effect on April 1: What it means and what changes. Complete details here

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New MSME payment rule 2024: FISME said that the rule could be beneficial for MSMEs.




Income Tax rule that bars businesses from claiming tax deductions for payments beyond 45 days to MSMEs for supply of goods and services will come into effect today (April 1).

What will change as per the new rule for MSMEs?

As per the rule, if a larger company does not pay an MSME within 45 days in case of written agreements, it cannot deduct that expense from its taxable income.

The rule comes as some industry bodies urged government to postpone implementation while the Federation of Indian Micro and Small & Medium Enterprises (FISME) said that the new rue could be a game-changer for MSMEs as large buyers could cold-shoulder suppliers and buy from those MSMEs that are not registered with Udyam.

What industry body has said on MSME rule?

FISME said that ”such fears are unfounded” as “replacing dependable suppliers just because a large company does not want to pay them in time is a ridiculous conclusion to draw. In any case, in the worst eventuality, the tax thus paid over such delays can be adjusted the following year when the company pays the supplier. But it does instill discipline in commercial practice.

FISME also said that the rule could be beneficial for MSMEs as, “The provision strengthens MSMEs’ position when negotiating payment terms with larger companies. Timely payments can minimise potential disputes and legal hassles over outstanding dues. It encourages more transparent and accountable business practices in the MSME ecosystem.”

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Pooja Gupta

CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

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CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

8 thoughts on “45-day MSME payment rule comes into effect on April 1: What it means and what changes. Complete details here”

  1. Ma’am what should I do if my party not paying in 45 days. Because my party thinks there will be nothing happen untill 2025 and so he stuck my payment and not paying me and he is not taking 45 days payment rule seriously. I am worried. Please help and paid service I can buy from you? So that you can help. Thanks

    Reply
  2. Dear CA-

    I AM A TRADER WITH MSME STATUS.
    MY PAYMENT IS STUCK WITH A BUYER OF MINE .
    ITS OVER DUE .
    PLS HELP US IN ANY WAY YOU CAN.

    Reply
  3. How to enforce this rule, as my corporate big client hasn’t paid my invoice for 2 months now. Even my CA isn’t able to help

    Reply
  4. What will happen if 1 st April 2024 bill settle by customer on 31st March 2025 .
    Only in Year end Final Balance sheet payment should not reflect beyond 45 days . And full year 45 days payment terms no value ?

    Reply
  5. After this new rule 99% of our customers says they will stop the purchase from our company. Instead they will go for non registered MSMe suppliers.
    On the paper this rules works excellent. Due to bad practice in the industry over the years. This law or rule is really not going to help Micro and Small Enterprises. If it all Government wants to stream line the whole scenario, they should link all the purchase and sales through Banking channel. So that payment is safe guarded and at the same time more transparency will be there for misleading sales.

    Reply

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