Exporters from various sectors are urging for an exemption from a recent regulation mandating the settlement of outstanding invoices to micro and small enterprises within 45 days.
Represented by approximately 15 export promotion councils, including the Federation of Indian Export Organisations (FIEO), about 150,000 exporters have expressed apprehensions regarding this requirement.
They argue that it could severely affect their liquidity, particularly since payments for exports often come with an average delay of 120 days.
Despite the Reserve Bank of India’s allowance of a nine-month period for the realization of export proceeds, exporters contend that such stringent payment terms may hinder their competitiveness on the global stage.
MSMEs don’t agree to the reasoning, however, Federation of Indian Micro and Small & Medium Enterprises (FISME) said that the Rule was brought in to instil discipline in commercial practices. Delays in payments make Banks mark MSMEs under Special Mention Accounts (SMAs) leading these accounts to be termed as NPAs.
Section 43B(h) of the Income Tax Act, slated to be enforced from April 1, mandates prompt payments to UDYAM-registered micro and small entities, aiming to address the persistent issue of delayed payments faced by these businesses.
However, exporters are advocating for an extension of the payment window to 120 days and propose excluding supplies to Micro, Small, and Medium Enterprises (MSMEs) from this provision.
Under the new rule, buyers failing to make timely payments to MSME-registered units would be liable to pay interest on the overdue amount.