New MSME payment rule leads to many cancelled orders

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January 29, 2024 Ahmedabad: The central government has implemented a new rule for
assessment year 2024-25 under which buyers must pay for goods bought
from MSMEs within 45 days of delivery and clear all dues to MSMEs
before March 31, 2024, failing which the pending payment will be deemed
to be income on which tax will be levied.
While the government’s intent is to protect MSMEs, this has caused
uncertainty in the market and Ahmedabad’s textile markets are seeing
cancellation of orders.
Some chemical traders are also feeling the effect. Some buyers have
decided not to buy goods before Feb 16 to ensure that their payment
deadline comes after March 31.
The textile value chain on the other hand operates on a credit period of up
to 120 days, so this rule has affected it the most.
Gaurang Bhagat, president of Maskati Cloth Market Mahajan, said, “We
will call a meeting of all associations to discuss the situation emerging
from this rule. There are many order cancellations being witnessed.”
Bharat Chhajer, former chairman of the Powerloom Development and
Export Promotion Council (PDEXCIL), said, “The move intends to help
MSME units but the immediate reaction is totally different.
In the textile business, the norm is a credit period of 120 days, so making
payments within 45 days to MSMEs will be difficult and impractical.
We have seen that several traders have cancelled recent orders, and many
have stopped buying goods from MSME manufacturers at least till Feb 16,
so that their payments fall due only in the next financial year. These issues
need some clarity.”
Karim Lakhani, a chartered accountant, said, “New purchases have dipped
after the rule was introduced. Customers are now buying goods from large
and medium units. Many trades operate on credit periods of up to 120
days, so many such businesses have cancelled orders.”

Nilesh Damani, secretary, Gujarat Dyestuffs Manufacturers’ Association
(GDMA), said, “In the chemical industry, the credit period offered is about
60 days but as demand is low this period is often extended.
As the new rule has been implemented, many buyers are inquiring with
sellers if they are registered as MSMEs or not.”

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