SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has called for the deferment of new rules recently enacted by the central government under section 43B of the Income Tax Act until they are comprehensively discussed with stakeholders.
While acknowledging that the new rules aim to ensure timely payments to and enhance liquidity of MSMEs, the FCIK observed that there is a need for comprehensive discussions with industry representatives to assess their advantages and disadvantages before implementation.
“The rules also lack clarity on their applicability and implementation,” stated FCIK in a statement, adding that registration as MSMEs is freely available to all traders, agents, service providers, processors, and manufacturers on the Udhyam portal.
Additionally, MSMEs engaged in manufacturing and processing activities themselves happen to be buyers of raw materials and other services from traders and fellow MSMEs well before producing and selling their finished goods.
The central government recently introduced significant changes in the Finance Act – 2023 after inserting clause (h) in section 43B of the Income Tax Act to strengthen the enforcement of MSME payment regulations. The amended rules now make it mandatory for buyers to release due payments of MSMEs within a maximum period of 45 days, or face disallowance of the expenditure, eventually enhancing their taxable income tremendously. The Finance Act further advises all companies and trade entities to clear all previous outstanding dues to MSMEs before March 31, 2024. Failure to adhere to these timelines will result in the pending payment being treated as income, subject to taxation.
FCIK informed that the manufacturing sector in JK has different types of buyers, including government departments and Public Sector Undertakings, wholesalers and retailers, and importers from various countries.
“Whereas hundreds of crores of due payments of MSMEs in JK are withheld at government departments and PSUs for longer durations, no law including the ‘Delayed Payments Act’ or ‘MSME SAMADHAAN’ has brought desired relief to MSMEs,” informed FCIK, adding that “even the orders passed by the MSME Facilitation Council in some cases do not get any compliance unless MSMEs are forced to seek relief in courts of law.” While the industry expects more stringent rules to compel government departments and PSUs to release timely payments to MSMEs, no such initiative has found a place in the recently amended Finance Act – 2023.
FCIK has raised alarm that the new rules might adversely impact the supply chain of various manufactured and processed goods from MSMEs of J&K to wholesale or retail traders. “While such supplies are currently affected on diverse timelines for different products, the new rules may force the buyers to reduce their intake and stocks, which eventually will impact the marketing of MSMEs,” suspects FCIK.
FCIK has solicited support from the UT government in recommending the deferment of the new rules until comprehensive deliberations take place between the Finance Ministry and stakeholders, and a viable timeline adjustment for different types of industry is incorporated into the rules.
