The payment period for products supplied to the textile sector by Mk companies is 90 days: TASMA.

The textile industry has raised concerns about the impact of a new clause in the Income Tax Act, 1961 in the Finance Bill 2023 on payment for goods supplied by micro and small enterprises (MSMEs). The Ministry of Finance added Section 43B(H) to the Finance Act of 2023, which ensures payment for goods supplied by SMEs within 45 days. This is in line with the provisions of Section 15 of the MSMED Act, 2006 to ensure prompt disbursement so that delays in cash flow do not affect MSMEs.

The Tamil Nadu Spinning Mills Association (TASMA) flagged the industry’s concerns and wrote to the Finance Ministry and MSMEs, saying the clause has created panic among suppliers and buyers in the textile value chain. “Despite the decision to insert Section 43B(H) in the Income Tax Act, 1961, many buyers who have so far received the goods/supplies on flexible payment terms agreed by the parties are hesitating. It is limited to only 45 days,” said the association

So far smooth business

In certain transactions in the textile industry, the supplier and the buyer accepted 90 days as the payment period and the transactions went smoothly. Suppliers and buyers find it takes 90 days to receive payment, given the nature of the commodity, which adds value through other processes, TASMA said. Therefore, he urged the MSME ministry to amend the clause allowing 90 days to release payments to MSMEs. “If it cannot be introduced as a general amendment to the law, it can be considered appropriately restrictive of the textile industry, taking into account current business practices”, announced the union.

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