(MENAFN- KNN India) New Delhi, Feb 13 (KNN) A recent legislation mandating prompt payments to registered Micro, Small, and Medium Enterprises (MSMEs) has stirred discomfort among organised apparel retailers and FMCG companies, according to top sources.
The law stipulates that any payment to MSMEs beyond 45 days of receiving goods or services will not be recognised as an expense and will be added to the company's profit for taxation purposes.
While this rule applies to all firms, it particularly affects industries like fast-moving consumer goods (FMCG), pharmaceuticals, and apparel retail, which rely on relatively long credit cycles when dealing with suppliers, including registered MSMEs.
Commenting on the issue, Riaz Thingna, a partner at Grant Thornton Bharat, highlighted that FMCG, apparel, and pharma companies often operate on credit cycles extending up to 3-6 months with their suppliers and trade partners, reported FE.
Such industries frequently base payment schedules on revenue from sales, making a 45-day credit structure impractical for them.
Tarun Arora, CEO of Zydus Wellness, reassured that his company adheres to timely payments to registered MSMEs and thus remains unaffected by the new rule.
However, some unnamed FMCG executives acknowledge the harsh impact of the regulation.
While they welcome the move to protect the MSME sector, they express concerns about potential repercussions.
They fear that companies may shy away from dealing with MSME suppliers in the future, and MSMEs themselves may opt to deregister to avoid losing business opportunities.
The new law, while aiming to support MSMEs, has raised legitimate concerns within affected industries.
As stakeholders navigate the implications, there's a pressing need for dialogue and potential adjustments to ensure a balanced and sustainable business environment for all parties involved.
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