Payment Deadline Panic: Thousands of MSMEs Drop Registration, Pragvi Intellifin Steps Up to Navigate the Crisis

On April 1, an amendment to the law went into effect that required micro, small, and medium-sized businesses (MSME) to pay their bills within 45 days.

As the business payment deadline approaches, thousands of MSMEs in India withdraw their registration. 

The government’s move to set a deadline for small businesses’ unpaid bills has infuriated thousands of small firms. Gujarati traders are suing, claiming that the new restriction is to blame for the decline in orders.

Over 40,000 Indian small businesses—12,000 of which are in Gujarat—have reportedly canceled their registration and filed an appeal with the Supreme Court to have the requirement to clear payments within 45 days removed, according to a CNBC Awaaz report. 

Anybody purchasing items from any of India’s 36 million micro, little, and medium-sized companies (MSME) is required by section 43H (B) of the Income Tax Act 1961 to make payment within 45 days. The buyer’s profit is increased by the outstanding balance.

Numerous small enterprises assert that since the regulation went into force on April 1, they have not received any new orders from larger clients. 

Federation of All India Vyapar Mandal President Jayendra Tanna said that because doing business with unregistered organizations enables the buyer to evade the payment deadline, business has begun to migrate from registered ones to them. 

The unexpected outcome has caused a great deal of agitation among small enterprises. The groups of other traders are getting ready to petition the court. 

“We have canceled the registration of our small MSMEs. Meghraj Dodwani, the head of the Ahmedabad Vyapari Mahasangh, stated that “we will go to the Gujarat High Court if we have to in the future.” 

Disclaimer: This should not be considered as advice or recommendation. Seek appropriate counsel for your obligations.