Rajeev Mardia
And Associates

Who qualify as MSME?

Manufacturing Enterprises and Enterprises rendering Services which satisfies below two conditions:

Criteria Micro Small Medium
Investment in Plant and Machinery or Equipment <= Rs.1 Crore <= Rs.10 crore <= Rs.50 Crore
              And And And
Turnover <= Rs.5 Crore <= Rs.50 Crore <= Rs.250 Crore


What is time limit for payment to be made to MSME?

  • As per section 2(b) & 15 of MSME act, due date for payment made to MSME party:
  • Within 15 days from date of acceptance or deemed acceptance of goods if no any written agreement made between parties
  • Within 45 days from date of acceptance or deemed acceptance of goods if written agreement made between parties

In no case, the time limit shall exceed 45 days.

What if payment is not made on or before specified time limit?

  • If buyer failed to make payment within specified time limit, the buyer shall require to pay interest (3 times of bank rate notified by RBI) for that the company shall require to make provision of interest payable to MSME in the books of accounts.
  • In case of Company, it is required to file MSME return to ROC in case of late payment made to micro & small category enterprise.

-Deduction on payment made to MSME under income tax section 43B w.e.f. 01-04-2023

As per section 43(b) of IT act, any amount payable to Micro/ Small enterprise is allowed as deduction only on actual payment basis. If payment is made within due date of section 139(1) but beyond the time limit mentioned in MSMED Act, then deduction is available in the year of payment and not in the year of accrual. However, section 43B is not applicable to medium category enterprise. As per MSMED Act, Retail Traders or Wholesalers are not considered as MSME entity. Thus, Section 43B is not applicable to the sum payable to Retail Traders or Wholesalers.

Example: Mr A (Seller) deliver goods of Rs. 30,000 to Mr. B (Buyer) on 20-03-2024 with following agreed date of payment specified in written agreement in different scenarios:

Sr. No. Time limit Due date Actual date of payment Year of Deduction
1 Within 10 Days 30-03-2024 25-03-2024 2023-24
2 Within 10 Days 30-03-2024 31-03-2024 2023-24
3 Within 10 Days 30-03-2024 04-04-2024 2024-25
4 Within 20 Days 09-04-2024 04-04-2024 2023-24
5 Within 20 Days 09-04-2024 12-04-2024 2024-25
6 Within 45 Days 04-05-2024 03-05-2024 2023-24
7 Within 45 Days 04-05-2024 10-05-2024 2024-25