Traders File Petition in SC against Income Tax Penalty Clause on MSME Credit to Buyers: Reports

By: Admin
April 18, 2024
Categories: MSME|News
4 Min Read

The Federation of All India Vyapar Mandal has filed a petition in the Supreme Court against Section 43B(H) of the Income Tax (I-T) Act. This newly introduced provision, part of the Finance Act 2022, limits micro and small enterprises (MSEs) from extending credit to buyers beyond 45 days. Any buyer exceeding this limit faces tax penalties and compound interest charges at three times the bank rates notified by the Reserve Bank of India (RBI), says a report.

The National president of the Federation, told ToI, that the provision places undue burden on MSEs, compelling them to adhere strictly to the 45-day credit limit while offering no regulations for the prompt payment of pending dues to these MSE suppliers.

The newly-introduced provision creates a classification among manufacturers regarding credit extension to buyers, he told the newspaper. “On micro, small, and medium enterprises all over India, the Centre has created a classification between manufacturers who can give credit to buyers only for 45 days and manufacturers who can give credit to buyers for more than 45 days or for an unlimited time,” he says, adding, “The provision unfairly discriminates against MSEs by favouring medium-scale industries, which face no such restrictions on credit extension. This discrimination may prompt small-scale industries to lose market share to their medium-scale counterparts.”

Moreover, He asserted that Section 43(B)(h) infringes upon the fundamental rights of MSEs to conduct business on their own terms and grant credit as they deem fit.

The petition filed by the Federation challenges the constitutionality of Section 43(B)(h), citing its detrimental impact on the entire business community, particularly Gujarat-based textiles, chemicals and engineering units.

Various industry associations have echoed these concerns to the Union government, highlighting the adverse effects of the provision on MSEs and urging its reconsideration, the report says.

Source from: https://moneylife.in/article/traders-file-petition-in-sc-against-it-penalty-clause-on-msme-credit-to-buyers-report/73952.html