The Centre has implemented a new rule 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 as taxable income.
While the government’s intent is to protect MSMEs Ahmedabad’s textile markets are seeing cancellation of orders over this uncertainty. Some chemical traders are also feeling the heat.
Some buyers have decided not to buy goods before February 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.
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.”
An Ahmedabad-based chartered accountant said, “New purchases have gone down after the new rule was introduced. Customers are now buying goods from large and medium units and ditching MSMEs. Many trades operate on credit periods of up to 120 days, so many such businesses have cancelled orders.”
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 and changing their purchase and payment plans accordingly, affecting the industry.
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