Tax practitioners seek relaxation in laws

Moreover, even MSME registered entities cannot escape the rule as they also have to make the payments to their suppliers who are again registered as MSMEs and are eligible to claim the benefits

The All India Federation of Tax Practitioners (AIFTP) has urged the Union Finance Minister to review the relaxation to specific Income-Tax laws and allow payment to be made within the ITR filing date.

Section 43B (h) required the payment to be made for goods and services to micro or small enterprises within a stipulated time of 15 days from the date of acceptance of supply and in case of an agreement between the buyer and the MSEs, it could be stretched to 45 days.

If the payment remains outstanding, then it can be made in April but within the permitted date. If payment is not made within the specified time then the expenses will be disallowed in FY 2023-24.

However if payment is made in FY 2024-25, the same may be claimed on payment basis in the assessment year 2025-26. It may be noted that in case of payment to MSE, the late payment made before the due date of filing income tax is not permitted as the first provision to Section 43B is not applicable in respect of payment required to be made under sec 43B (h). The traders are now reluctant to make purchase from Micro and small enterprises in apprehension of disallowance of purchase amount remaining outstanding at year end that is 31st March.

Talking to Bizz Buzz, Narayan Jain, National President of All India Federation of Tax Practitioners (AIFTP), says, “We have urged the Union Finance Minister to review the said provision and relax the same by allowing payments made within the due date of filing ITR.”

Interestingly, the rule has both positive and negative side for the registered MSMEs.

Abhishek Aneja, a Delhi-based tax expert, says, “The positive is that they can get their payments faster, while the negative side is that they can lose some of their business to non-MSME registered entities or traders if they offer better payment terms.”

Moreover, even MSME registered entities cannot escape the rule as they also have to make the payments to their suppliers who are again registered as MSMEs and are eligible to claim the benefits, he said.

Moreover there is a separate rule under the GST laws for making the payment to claim Input Tax Credit (ITC), which provides a longer duration of 180 days. For ease of doing business, it will be better that the time lines are kept similar under different laws.