45-day payment rule: New fund will work with banks to help MSME units, says FM Sitharaman

July 28, 2024

Synopsis
Finance Minister Nirmala Sitharaman revealed that the government is establishing a new fund to help MSMEs facing financial issues due to delayed payments. Traders must now clear MSME bills within 45 days according to Section 43B(h) of the Income Tax Act. The new rule, active from April 1, has made MSMEs apprehensive. The budget has also offered collateral-free loans for MSMEs and proposed a Rs 1000 crore venture capital fund for the space sector. Additionally, the Rs 1 lakh crore Anusandhan National Research Fund will support research and innovation, particularly in Bengaluru.

The union government is working on a new fund which would work with banks to see that MSME units would continue to receive support if any of them faced financial distress due to delayed payments from their customers, Finance Minister Nirmala Sitharaman said on Sunday.

She was referring to the new clause, Section 43B(h) of the Income tax act 1961, which requires traders to clear the bills of MSME units within 45 days of purchase or lose benefits of deduction. The new rule came into force from April 1 this year, but MSME units had appealed to the finance ministry to review it fearing loss of business.

The banks will continue to support them with working capital needs and help them overcome their distress situations, she said, addressing a media conference in Bengaluru.

The Budget, the FM said, had recognized the needs of the MSME sector and has facilitated bank loans to the MSME units for the purchase of machinery and equipment without any collateral or third-party guarantee.

The sector, Sitharaman said, had complained that the banks did not understand their turnover cycle or the way they did their business, so had two minds about supporting them. Banks, she added, would now work on this, and the government had also provisioned for SIDBI to open new branches across the major MSME clusters.

[The Economic Times]