Challenges Faced by MSEs in the Chemical Industry due to New 45-days payment rule
By: Admin
April 18, 2024
Categories: MSME |News
4 Min Read
Micro and small enterprises (MSEs) within the chemicals sector are facing a decline in orders due to the enforcement of Section 45B(H) of the Income Tax Act, which mandates buyers to settle payments with MSE manufacturers within 45 days. Gujarat stands as the nucleus of the chemical industry, hosting 90% of its units falling under the MSE category. Consequently, these entities are experiencing a downturn in business operations owing to the recent regulation.
Insiders within the industry reveal a shift in procurement practices, where previously, various raw materials were sourced from local MSEs. However, buyers are increasingly turning towards importers to acquire these materials, as it exempts them from adhering to the 45-day payment window. Notably, segments like pharmaceuticals, agrochemicals, organic, and inorganic chemicals are witnessing this transition.
To address timely payments to MSEs, the central government has introduced Section 43B(H), mandating settlement within 45 days to prevent outstanding payments from being considered as the buyer’s income. While aimed at aiding MSEs, this regulation has posed challenges for them, evident from the impact on new orders in February and March.
Furthermore, many buyers are now shifting towards purchasing from medium and large enterprises to circumvent the 45-day payment requirement. This shift extends even within the MSE sector, where businesses previously relied on each other for raw materials. Instead, they are now turning to traders importing these materials.
Acknowledging the importance of punctual payments to MSEs, the Secretary of the Gujarat Dyestuffs Manufacturers’ Association (GDMA) views Section 43B(H) positively. However, there are concerns about fairness, as the regulation applies selectively. The association has raised this issue with the central government, urging for a level playing field across the industry.