#Economy Section 43 B(h) of Income tax act. Background : U | VK IAS- prelims (UPSC highlights)
#Economy
Section 43 B(h) of Income tax act.
Background : Under the Micro, Small and Medium Enterprises Development (MSMED) Act, payments to MSMEs should be made within 45 days of accepting goods or services if there is a written contract. If no such agreement exists-15 days. Section 43B (h) of the Income Tax Act reinforces this by stipulating that such payments will be allowed as a deduction for the buying company only if made within the timeframe . Otherwise, the amount due would be treated as income - thus taxable.
Challenge : some buyers, to avoid the stringent conditions of timely payments, might prefer to engage with suppliers not registered under UDYAM, hence not protected by the provisions of the MSMED Act= registered MSMEs at a disadvantage, potentially leading to longer payment cycles or even loss of business as buyers shift to unregistered suppliers to circumvent the regulations.
