Traders file petition in SC against tax penalty clause

Ahmedabad: The Federation of All India Vyapar Mandal has lodged a petition in the Supreme Court against Section 43B(H) of the Income Tax Act. This newly introduced provision, part of the Finance Act 2022, limits Micro and Small Enterprises (MSEs) from extending credit to buyers beyond 45 days. Any buyer exceeding this limit faces tax penalties and compound interest charges at three times the bank rates notified by the Reserve Bank of India.
According to Jayendra Tanna, the national president of the federation, this provision places undue burden on MSEs, compelling them to adhere strictly to the 45-day credit limit while offering no regulations for the prompt payment of pending dues to these MSE suppliers.
He said that the newly introduced provision creates a classification among manufacturers regarding credit extension to buyers. “On micro, small, and medium enterprises all over India, the Centre has created a classification between manufacturers who can give credit to buyers only for 45 days and manufacturers who can give credit to buyers for more than 45 days or for an unlimited time," he said, adding, “The provision unfairly discriminates against MSEs by favouring medium-scale industries, which face no such restrictions on credit extension. This discrimination may prompt small-scale industries to lose market share to their medium-scale counterparts.”
Moreover, Tanna asserts that Section 43(B)(h) infringes upon the fundamental rights of MSEs to conduct business on their own terms and grant credit as they deem fit.
The petition filed by the federation challenges the constitutionality of this section, citing its detrimental impact on the entire business community, particularly Gujarat-based textile, chemical, and engineering units.
Various industry associations have echoed these concerns to the Centre, highlighting the adverse effects of the provision on MSEs and urging for its reconsideration.