v Section 43B(h) Disallowance of the sum payable to Micro or small enterprises
- Section 43B(h) applies to sums of outstanding as on March 31, 2024 which are paid off in subsequent financial year.
- Any amounts outstanding as on March 31, 2023 or before does not come under purview of this section as this section is applicable on April 01, 2023.
- Amount if any disallowed is not permanent/ irreversible disallowance. Amount disallowed will be allowed on payment basis in the year of actual payment while computing business income.
- As per section 15 of the MSMED Act, 2006, for a supplier who supplies any goods or renders any services to any buyer, the buyer shall make payment for such goods or services within 15 days from the date of delivery of such goods or services. The time limit can be extended to period more than 15 days although to 45 days in maximum. Traders are not covered in the purview of section 43B(h).
- There is no exemption for buyers who are Micro or Small enterprises. It cannot be said that Section 43B(h) applies only to medium or large enterprise buyers.
- The composition of correct Udyam Number is in ‘UDYAM-XX-00-0000000’, where ‘XX’ denotes the State, ‘00’ denotes the first two letters of the PIN Code of the State and the Seven digits ‘0000000’ represent the number.
- If the sum payable to the Micro or Small Enterprise includes GST, the disallowance is restricted to the amount excluding GST if the GST is claimed as Input Tax Credit (ITC) in the books of accounts. However, if the buyer opts not to claim the input tax credit under GST and treats it as an expense in its Profit and Loss account, deduction against GST will only be allowed based on actual payment.
- In case of capital goods, depreciation cannot be disallowed on the cost of the asset which was capitalised in books of account.
- Assesse can search Udyam Registration Number of their vendors on the Udyam Portal under the newly enabled “Verify Udyam Registration Number” at the following link: https://udyamregistration.gov.in/udyam_verify.aspx
- What constitutes Micro and Small enterprise:
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Category of Enterprise
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Investment criteria
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Turnover criteria
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Micro Enterprise
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Net investment in plant and machinery or equipment does not exceed Rs 1 crore
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Net turnover does not exceed Rs 5 crores
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Small Enterprise
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Net investment in plant and machinery or equipment does not exceed Rs 10 crore
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Net turnover does not exceed Rs 50 crores
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Turnover is a net turnover, which means it encompasses the turnover of goods and services minus the exports of goods and services.
For calculation of plant and machinery, the purchase (invoice) value of a plant and machinery or equipment, whether purchased first-hand or second-hand, shall be taken into account, excluding GST.
- Section 43B(h) is applicable for calculating taxable business profits of a company in regular assessment under the Act. It is not applicable for the calculation of Minimum Alternate Tax under Section 115JB.