Section 43B of Income Tax Act read with Section 15 and 16 of MSME Act makes buyer oblige to pay pending dues to supplier within 45 days from the date of purchase of goods or services.
Burning Issues on 43B of Income tax Act MSME :
1. What is the time limit to make payment under section 43B of Income Tax Act ? Answer : Buyer is liable to pay within 45days from the date of receipt of goods or services.
2. What happens when buyer done an agreement to make payment after 45 days? Answer : All the agreements are govern through Contract Act, however MSME Act has prevailing effect over the Contract Act so it is per se supra in all matter of MSME. So in section 15 of MSME Act it is clearly said that buyer and seller may have contract and payment terms. But in any case payment terms is not more than 45 days. Any contract between buyer and seller having payment terms more than 45 days is challengeable if payment is not received.
3. What happens when goods and services are under dispute? Answer : In case where goods and services provided are not as per the term of purchase order and as a buyer you have to resolve that issue by replacement or other accepted business practice. MSME Act provides 15 days time to resolve such issues and issue Credit /Debit note. If no action is taken within 15 days after delivery than payment must be done within 45 days from the day of receipt of goods and service. In case dispute arise than 45 days from the date of resolution of issue. However date of resolution is not more than 15days from the date of delivery of goods or services.
4. What is Date of applicability of Section 43B(h) ? Answer : Section 43B(h) inserted vide Finance Bill 2023, and it is come into force from 01.04.2024.
5. Is section 43b(h) applicable to Non Audit assesses ? Answer : Yes, it is applicable to all the assesses deals with micro and small suppliers in the course of business. Non audit assesses are also under the per view of this section.
6. What is outstanding expense limit for Section 43B(h) ? Answer : No limit is specified in the act means you have to pay any sum payable to your supplier other wise it will be disallowed in return of income.
7. In which cases section 43b(h) is not applicable ? Answer : This section is not applicable to those buyer having supplies from sellers having turnover above Rupees 50 crore. it means this section is safe guard the interest of small and micro MSMEs. Helps them to recover their money on time.
8. How to find out status of supplier for section 43B(h) ? Answer : As a buyer you need to ask for MSME Udhyam certificate of your Supplier to check their current status.
9. What happens when we deduct TDS and unable make balance payment ? Answer : As per the section 43B(h) you have to the purchases in full which you want claim as expenses. If you deduct TDS and not pay balance payment leads you to disallow balance purchase expense, which you are allow you to claim in the year of payment.
10. What happens if supplier is unable to receive payment outstanding on or before 01.04.2024 ? Answer : Supplier can file case against buyer under MSME SAMADHAN to recover outstanding payment.
11. Is auditor liable to verify compliance of section 43B(h) ? Answer : Yes as an auditor you have to verify and report the compliance of section 43B(h) of Income Tax Act.
To read more on section 43B(h) of Income Tax.
Following clause (h) shall be inserted after clause (g) of section 43B by the Finance Act, 2023, w.e.f. 1-4-2024:
(h) any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006),
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him :
Provided that nothing contained in this section [[except the provisions of clause(h)]] shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.