Important FAQ’s on 43B
Q1: When does the amendment become effective?
A1: The amendment applies from FY 2023-24, corresponding to AY 2024-25.
Q2: What defines an MSME?
A2: MSME classification is based on investment and turnover, with Micro units having up to Rs.1 crore investment and Rs.5 crore turnover, Small units up to Rs.10 crore investment and Rs.50 crore turnover, and Medium units up to Rs.50 crore investment and Rs.250 crore turnover. The amendment, however, is applicable only to Micro and Small enterprises.
Q3: Is the amendment retroactive to outstanding amounts as of March 31, 2023?
A3: No, the amendment is applicable from FY 2023-24 and does not apply to amounts outstanding as of March 31, 2023.
Q4: Is MSME registration mandatory for applying Section 43B(h)?
A4: While MSME registration provides clarity, enterprises without Udyam Registration but have declared their category may still be considered under Section 43B(h) for deductions.
Q5: How can one verify a supplier’s MSME status?
A5: Suppliers now include their MSME registration number on invoices, which can be verified through the MSME Portal.
Q6: What if a supplier hasn’t communicated their MSME registration?
A6: It’s the supplier’s responsibility to inform their MSME status. Without such intimation, disallowance under section 43B(h) cannot be enforced.
Q7: Does Section 43B(h) apply to MSME traders?
A7: Section 43B(h) primarily targets enterprises engaged in manufacturing or services, excluding traders, except for priority sector lending benefits.
Q8: What if a supplier is both a trader and manufacturer/service provider?
A8: Section 43B(h) applies to dues outstanding to suppliers involved in both trading and manufacturing/services.
Q9: Are capital expenditure dues subject to disallowance under Section 43B(h)?
A9: No, since capital expenditures aren’t deductible expenses under the Income Tax Act, they’re not subject to disallowance under Section 43B(h).
Q10: How are year-end provisions treated under Section 43B(h)?
A10: Provisions for goods or services not delivered by year-end cannot be disallowed under Section 43B(h).
Q11: What if payment is made late but within the same financial year?
A11: Deductions can still be claimed within the same financial year if payment is made.
Q12: Can deduction be claimed if payment is made after 45 days but before filing the income return?
A12: Deductions are only allowed in the year the payment is made, not based on the accrual.
Q13: Does Section 43B affect presumptive taxation schemes?
A13: No, Section 43B does not apply to taxpayers under presumptive taxation schemes like 44AD/44ADA/44AE.
Q14: How is interest on delayed payments to MSMEs treated?
A14: Interest on delayed payments is not deductible and is charged at three times the bank rate for the delay period.
Q15: How to calculate the delay if goods arrive late?
A15: The calculation starts from the resolution of any dispute regarding the delivery, ensuring compliance with the payment terms under the MSMED Act.
