MSME NEW PAYMENT TIMEFRAME BY GOVERNMENT OF INDIA

The Indian government's 45-day bill payment rule is a significant step towards ensuring timely payments to Micro, Small, and Medium Enterprises (MSMEs). This rule, introduced as clause (h) in Section 43B of the Income Tax Act by the Finance Act of 2023, mandates that all buyers must settle their dues to MSMEs within 45 days of the receipt of goods or services. In the absence of a written agreement, the payment must be made within 15 days¹²⁴.

**Understanding the 45-Day Rule**

The 45-day rule is designed to protect MSMEs from delayed payments, which can severely impact their cash flow and operational efficiency. The rule applies to all buyers who purchase goods or services from MSMEs, and failure to comply will result in the buyer being required to pay interest at a rate equal to three times the bank rate notified by the Reserve Bank of India³.

**Implications for Businesses**

Businesses must adapt their payment processes to comply with this new regulation. This includes updating their accounts payable systems, training staff on the new rule, and closely monitoring payment deadlines to avoid penalties.

**Benefits for MSMEs**

The rule is expected to bring several benefits to MSMEs, including improved liquidity, reduced borrowing needs, and better relationships with buyers. It also provides MSMEs with a legal framework to demand timely payments.

**Potential Revisions and Postponements**

There have been discussions about revising or postponing the implementation of this rule. The Finance Ministry is contemplating a deferment of the enforcement of Rule 43B (h), with the rule anticipated to take effect from April 1, 2025².

**Conclusion**

The 45-day bill payment rule is a welcome change for MSMEs in India. It promises to alleviate the financial strain caused by delayed payments and foster a more supportive ecosystem for the growth and sustainability of MSMEs. Businesses and MSMEs alike must stay informed about any potential changes to the rule's implementation timeline and prepare accordingly.