Payoff MSME Vendors before it's too late

After the Insertion of clause "h" to Section 43B of the Income Tax Act, there's a Tax impact on business entities for non-payment to their MSME Vendors dues within Max. 45 days of it being due and/or outstanding as on 31st March 2024. The said amount debited to profit & loss statement either as expense or as purchase shall stand disallowed in the relevant previous year and the assessee has to pay tax on the same as per provision. Further, the same expense shall be allowed in the year of actual payment.

Hence, it is advised to all buyers with any pending dues to MSME as on end of FY 2023-24 to review such payment and consider payment of the same within the stipulated time of 45 days. Further, it is advisable to mention the credit period in PO or WO of up to 45 days explicitly. As the stipulated days stand as 15 days by rule, if no credit period is stipulated in the agreement with the vendor. In addition to the above, the said provision is in the nature of a non-obstante clause, which means mentioning more than 45 days in the credit period agreement with the Vendor doesn't defy the stipulated period of 45 days by law.

Your Advisor, CA J K Parida