Following a recent amendment to the income tax act, micro and small enterprises (MSEs) within the chemicals sector are experiencing a downturn in business, leading to reduced revenues. Under Section 45B (H) of the income tax act, buyers are obligated to settle payments with MSE manufacturers within a forty-five day timeframe. The rule aims to safeguard the financial interests of MSEs by ensuring timely payments.
Gujarat, known as the epicentre of the chemical industry, has approximately ninety percent of MSE units. Traditionally, these MSEs sourced various raw materials from local counterparts. However, a notable shift is underway as buyers increasingly favour importing raw materials from international suppliers.
This preference arises from the exemption from the forty-five day payment requirement when dealing with overseas suppliers. Consequently, segments like pharmaceuticals, agro-chemicals, and both organic and inorganic chemicals are observing this transition.
As reported by Vibes of India, this change is not only impacting direct transactions between MSEs and buyers, but also influencing MSE-to-MSE transactions. Previously, MSEs procured raw materials from fellow MSE manufacturers. Yet, with the new regulation, they are now turning to importers and traders for their supply needs.
