Solan: Pharma MSMEs resent new norm

Ambika Sharma

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Solan, February 19

The Himachal Drug Manufacturers’ Association (HDMA) has sought relaxation in the 45-day payment norm for industries having a turnover of Rs 100 crore and Rs 50 crore for one year and two years, respectively.

The new provision, introduced under Section 43 B of the Income Tax Act, would be implemented from the assessment year 2024-25 where default would invite penal action. Terming it contrary to their business, the investors sought its phase-wise implementation.

“There are around 5,00 pharmaceutical MSMEs in Baddi. Besides there are more than 2,000 allied industries and 155 large coporates in Himachal. The proposed amendment aimed at streamlining the payment cycles between customers and the MSMEs as well as service providers, is appreciable as it will provide necessary financial support to the MSMEs,” said Rajesh Gupta , head, HDMA.

“Investors usually buy raw material in bulk and pay at the end of a fiscal but this provision will force us to make prompt payments. This will offset the financial cycle of the industry,” added Sanjay Sharma, another HDMA official.

However, it introduces a penal provision for failing to make the payment within 45 days compelling the beneficiaries to settle the outstanding amount within the stipulated time with a stricter 15-day timeline in the absence of a written agreement.

“The provision will, however, disproportionally impact the MSME assesses. Since the micro and small assesses, having an annual turnover of less than Rs 100 crore and Rs 50 crore, are already under stress due to tightened working capital, adapting to the new norm will require infusion of additional working capital of Rs 3 to Rs 10 crore. This will pose a significant challenge for compliance and the MSMEs will be forced to shift their business to large sector to avoid this rule.”

Gupta said they urged the Prime Minister to provide relaxation for turnover up to Rs 100 crore and Rs 50 crore for the MSMEs as it would force them to shift to large sector.

He said since the pharmaceutical industry was also facing other stipulations like implementing revised Schedule M which too requires a significant chunk of capital expenditure to be made within a year, the industry faces the risk of shutting down for non-compliance. This new rule would further burden the pharma MSMEs.