Surat textile mills to shut two days a week due to 45-day MSME payment rule
SURAT : Due to the 45-day payment rule for Micro, Small, and Medium Enterprises (MSME), several textile mills in the city are now shutting down their production for two days a week. Until March 31, two weekly holidays are being implemented in the many textile mills.
South Gujarat Textile Processors Association (SGTPA) President Mr. Jitendra Vakharia said that considering the provision of making payments within 45 days from the agreement date, textile traders are unable to complete the entire chain—from purchasing grey fabric to processing it in mills and selling the textiles—within 45 days. As a result, for the second consecutive year, job work orders have declined in the last two months of the financial year, i.e., February and March. The boom that was seen in the textile market before and after Diwali 2024 has slowed down. Considering the 45-day provision of the MSME Act, the Ramadan Eid business may also be affected this year, as traders are holding back on new orders. With the decline in job work orders, mill owners are observing weekly leaves.
On one hand, traders are required to make payments for the grey fabric and processing of the textile; however, there is no guarantee that traders will receive payments within the 45-day timeframe. Due to this, traders are looking at a significant financial burden before March 31, 2025, and have halted new purchases of grey fabric. “Section 43B(H) of the Income Tax Act has a lesser impact on mill owners and weavers but a greater effect on textile traders,” he further said.
What is 45-day MSME payment rule ?
Section 43B(h) of the Income Tax Act mandates that payments to MSMEs shall be made within 45 days from the date of the agreement or invoice to qualify for tax deductions. If this 45-day deadline is not met, buyers lose the ability to claim these expenses as deductions from their taxable income. This regulation highlights the importance of timely payments to MSMEs and promotes compliance with payment deadlines. It also aims to ensure prompt payments, improve the cash flow of MSMEs, and prevent financial stress in the sector.