The new regulation implemented on April 1 mandates companies to settle their dues to micro, small, and medium enterprises (MSMEs) within 45 days to ensure timely payments. Non-compliance with this rule would result in a tax liability on the overdue amount.
According to a report by CNBC Awaaz, more than 40,000 small businesses, including 12,000 in Gujarat, have canceled their registration and appealed to the Supreme Court to remove this regulation. Since the implementation of the regulation, several small businesses have reported a decline in new orders from larger clients. This decline in orders could be attributed to the stringent timeline for payment settlement, impacting the cash flow and operations of MSMEs.
The move to approach the Supreme Court reflects the concerns and challenges faced by MSMEs regarding the practicality and feasibility of the 45-day payment rule. These businesses argue that such regulations could potentially burden them with additional tax liabilities if their larger clients fail to comply with the payment timeline.
The appeal to the apex court underscores the urgency and importance of addressing the grievances of MSMEs regarding payment delays and ensuring a conducive environment for their sustained growth and development. It also highlights the need for a balanced approach that considers the interests of both MSMEs and larger corporations in the regulatory framework governing payment terms and conditions.
