Secured payment for material from MSME units gives entrepreneurs sleepless nights
Neeraj Bagga
Amritsar, February 13
The announcement in the Union Budget that entrepreneurs will have to pay for purchase of goods and services from the MSME units within 45 days — the credit period — has been giving sleepless nights to both sides. Notably, a majority of the units, whether in textiles, fans, nut and bolt manufacturing, machinery for printing and packaging industry and others, fall under this category.
No benefit of deduction, no refund
Entrepreneurs will have to pay for purchase of goods and services from the MSME units. If the amount is not paid in the same financial year and within 45 days, then the Income Tax Department will consider it as income on which tax will have to be paid. The special thing is that there will be no benefit of deduction and no refund. — Piara Lal Seth, President of the Punjab Pradesh Beopar Mandal
Piara Lal Seth, president of the Punjab Pradesh Beopar Mandal (PPBM), said as per the announcement, if the amount is not paid in the same financial year and within 45 days, then the Income Tax Department will consider it as income on which tax will have to be paid. The special thing is that there will be no benefit of deduction and no refund.
He said a cursory reading of the new norm gave an impression of the rule being simple but as soon as one went deeper, its complexities came to the fore, which were enough to disturb the entrepreneurs.
He feared that the norm would create a new problem, especially for small entrepreneurs. If the purchase is not paid for between January and March, the entire purchase will be treated as income. That is in the next financial year, the purchase amount will be added to the income tax return (ITR) on which tax will have to be paid.
Moreover, the entrepreneur will not even get a refund of the loss from the Income Tax Department, he said. While the government came up with the new norm to boost the MSME sector by asking industry to clear the due within a specified time-frame, it has also unsettled those in the business.
