What we do
Our work in this practice group is structured around the records, deadlines, and decisions involved:
- Section 43B(h) Payment Protection: Statutory protection ensuring buyers settle outstanding invoices within 15 or 45 days to avoid severe tax disallowance.
- Collateral-Free Bank Financing: Priority eligibility for loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
- Lower Borrowing Interest Rates: Concessional interest rates (typically 1% to 1.5% lower) under priority sector lending guidelines.
- 50% IP Government Fee Rebate: Massive statutory fee concessions on Trademark, Patent, and Design registrations with the Controller General of Patents.
- Government Tender Exemptions: Complete waiver of Earnest Money Deposit (EMD) and tender document fees in central and state government procurements.
- Statutory Delayed Payment Redressal: Access to the MSME Samadhaan Facilitation Council to recover delayed payments with compound interest at 3x the RBI bank rate.
How the engagement works
Governed by the Micro, Small and Medium Enterprises Development Act, 2006 and Ministry of MSME Notification S.O. 2119(E). Highly critical for tax compliance under Section 43B(h) of the Income Tax Act, 1961, introduced via Finance Act 2023, mandating strict payment timelines to Micro and Small enterprises.
New Business & Startup Launch: Securing official MSME status immediately after incorporation to access government benefits, bank loans, and subsidies.
Vendor Compliance for Section 43B(h): Providing official Udyam certificates to corporate and institutional clients to mandate timely invoice settlements.
Buyer Due Diligence & Year-End Vendor Audits: Companies verifying their supplier base to classify Micro, Small, and Medium enterprises to avoid tax disallowance under Section 43B(h).
Intellectual Property Cost Optimization: Startups and MSMEs seeking 50% government fee rebates when filing trademark and patent applications.
Bank Loan & Working Capital Enhancement: Enterprises applying for Mudra loans, CGTMSE limits, or working capital credit lines from public and private banks.
Recovery of Delayed Receivables: Utilizing the statutory MSME Samadhaan council mechanism to enforce recovery of overdue payments from defaulting corporate buyers.
Classification & Investment Threshold Evaluation
We analyze plant and machinery investments (depreciated cost) and net turnover figures (excluding exports) to determine the exact statutory classification: Micro, Small, or Medium.
Udyam Portal Registration & Verification
We execute the complete registration process on the official Ministry of MSME Udyam portal, ensuring precise linkage with Income Tax and GSTN databases.
Section 43B(h) Vendor Classification Advisory
We advise businesses on establishing vendor classification registers, drafting MSME declarations, and creating compliant payment agreements with 45-day clauses.
General questions
01What are the investment and turnover limits for MSME classification?
Under the composite criteria: (1) Micro Enterprise: Investment in Plant & Machinery/Equipment not exceeding ₹1 Crore, and Turnover not exceeding ₹5 Crore; (2) Small Enterprise: Investment not exceeding ₹10 Crore, and Turnover not exceeding ₹50 Crore; (3) Medium Enterprise: Investment not exceeding ₹50 Crore, and Turnover not exceeding ₹250 Crore. Note that export turnover is excluded when calculating turnover thresholds.
02What is Section 43B(h) of the Income Tax Act and how does it affect businesses?
Section 43B(h), introduced by the Finance Act 2023, provides that any sum payable by an assessee to a registered Micro or Small enterprise beyond the time limit specified in Section 15 of the MSMED Act (within 15 days without agreement, or up to 45 days under written agreement) will be disallowed as an expense in that financial year and taxed as business profit. The deduction is allowed only in the year the payment is actually made.
03Does Section 43B(h) apply to Medium enterprises or Traders?
No. Section 43B(h) strictly applies to payments owed to "Micro" and "Small" enterprises engaged in manufacturing or provision of services. It does not apply to Medium enterprises. While retail and wholesale traders can register on Udyam for priority sector bank lending, judicial interpretations clarify that the delayed payment protections of the MSMED Act do not apply to pure traders.
04Can a trader or retail merchant register on the Udyam portal?
Yes. The Ministry of MSME issued an order permitting Retail and Wholesale Trade enterprises to register on the Udyam portal. However, their registration benefits are restricted primarily to Priority Sector Lending from banks, and they do not qualify for delayed payment council proceedings under the MSMED Act.
05What is the fee charged by the Government for Udyam Registration?
The Government of India charges zero (₹0) official fees for Udyam registration on the official portal. Our professional fee covers consultation, correct activity NIC code mapping, financial threshold calculations, filing execution, and Section 43B(h) compliance structuring.
06Is GST registration mandatory to obtain an MSME Udyam Certificate?
Under current rules, GSTIN and PAN are generally mandatory for entities that are required to obtain GST registration under the CGST Act. However, entities that are legally exempt from GST registration (such as small businesses below the GST threshold of ₹40 Lakh for goods or ₹20 Lakh for services) can register on Udyam using PAN without GSTIN.
07How does the MSME Samadhaan portal help with unpaid bills?
If a buyer fails to pay a registered Micro or Small enterprise within 45 days, the MSME can file an online application on the MSME Samadhaan portal. The dispute is referred to the state Micro and Small Enterprise Facilitation Council (MSEFC). If the buyer defaults, the council can order payment of the principal amount along with compound interest with monthly rests at 3 times the RBI bank rate.
