New MSME payment rule leads to many cancelled orders.
The central government has implemented a new rule for the 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.
One of the expert said, “We will call a meeting of all associations to discuss the situation emerging from this rule. There are many order cancellations being witnessed.”
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.”
Another expert 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.”
Secretary of the 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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