Master Thread on Section 43B(h)

Section 43B(h)-Payment based deduction for amount payable to micro and small enterprise

• Applicable from AY 2024-25 onwards
• Not Applicable for Transaction pertaining to on or before 31/03/2023
• Due Date for Paymen -15 Days from Date of Acceptance if No Written Agreement -45 Days from Date of Acceptance if a Written Agreement is there
• Applicable for Amount payable to micro and Small Enterprise (MSE) who are manufacturers or service providers
• -Not Applicable for amount payable to medium enterprises
• -Not Applicable for amount payable to unregistered MSEs
• -Not Applicable for the amount payable to traders because their  registration on UDYAM portal is for the purpose of priority sector  lending only

. Applicable for the amount payable for Goods & Services
-Not Applicable for actionable claims and money
-Not Applicable on Interest on Loans as it is not goods nor services
-Not Applicable on Salary as it is not goods nor services
-Not Applicable on Amount Payable for Capital Goods as it was not claimed as Expense

. Definitions
-Buyer means whoever buys any goods or receives any services from a supplier for consideration
-Supplier means a micro or small enterprise, which has filed a memorandum with the authority referred to as u/s 8(1)
-Manufacture means processing of raw material or inputs in any  manner that results in emergence of a new product having a distinct  name, character and use

. Not Applicable for Buyer filing ITR u/s 44AD/44ADA/44AE (Presumptive Taxation)
-These sections have an overriding effect over section 28 to 43C, so section 43B(h) is not applicable
-If buyers turnover is below 10 Crore and Cash transactions is below  5% then audit u/s 44AB is not applicable but Books of Accounts are required to be maintain, in such cases section 43B(h) is Applicable

. If Amount payable to MSE is liable to TDS and that TDS is also not paid to government then dis-allowance will be 30% u/s 40(a)(ia) and 70% u/s 43B(h)

. If Amount payable to MSE is inclusive of GST then dis-allowance will be limited to the amount exclusive of GST because GST was never claimed as expenses so it can’t be dis-allowed as expenses

. Required to be reported in clause 22 of Form 3CD

. Any transactions carried out before the date of registration under MSMED Act, 2006 will not attract disallowance u/s 43B(h)

. If supplier has cancelled his MSE registration then payment made for any purchases or services received before date of cancellation shall be covered u/s 43B(h)

(All these are my personal views and not legal advice)