Exporters spanning various sectors have united to appeal for exemption from a recently introduced regulation mandating payment of pending bills to micro and small units within 45 days.
Approximately 150,000 exporters, encompassing 15 export promotion councils including the influential Federation of Indian Export Organisations, have raised concerns regarding the potential liquidity strain this regulation may impose.
Exporters argue that their payment cycle, with an average lag time of 120 days, clashes with the newly imposed 45-day deadline. They contend that this longer payment duration is necessary for international competitiveness, especially considering that other countries often offer more lenient credit terms. The Reserve Bank of India's allowance of up to nine months to realiSe export proceeds underscores the complexities involved.
Section 43B(h) of the Income Tax Act, slated to take effect on April 1, necessitates payments to UDYAM-registered micro and small entities within the 45-day timeframe, ostensibly to tackle the issue of delayed payments encountered by such units. However, exporters are lobbying for an extension to 120 days and propose that transactions with micro, small, and medium enterprises (MSMEs) be excluded from this provision.
Defined by investment and turnover thresholds, micro and small units are pivotal in the supply chain for many exporters. The new rule would necessitate interest payments in the event of delayed payments to these units, further exacerbating exporters' liquidity challenges. Some exporters even fear losing business and facing returns due to the added financial strain.
Acknowledging the need to enhance liquidity for micro and small companies, exporters advocate for a phased reduction in the payment timeframe. They argue that this would strike a balance between the interests of both exporters and MSMEs.
Moreover, they stress the importance of exempting export-related transactions from this regulation to maintain competitiveness on the global stage.
