Services for clients across India. Applicable state, sector and professional requirements are assessed before an engagement.
Section 43B(h) turned MSME payment terms into a tax question for buyers: pay micro/small suppliers beyond the MSMED window and the deduction defers to the year of payment. The review this page offers is buyer-side hygiene — knowing which vendors qualify, ageing them correctly, and closing the year without a surprise add-back.
When this service is typically required
- Your business BUYS from MSMEs — the buyer’s 43B(h) checklist
- Year-end is approaching and the disallowance exposure is unquantified
- Vendor masters lack Udyam status, so nobody knows who qualifies
- The auditor asked for the 43B(h) working and none exists
Indicative scope
- Vendor-master enrichment: Udyam status collection and classification
- Ageing built on MSMED terms (agreed period capped at 45 days; 15 without agreement)
- Exposure quantification: what defers if unpaid by year-end
- Payment-prioritisation calendar for the final quarter
- The audit-ready working paper (also feeds MSME-1 half-yearly where applicable)
Key points at a glance
| Item | Position |
|---|---|
| Trigger | Payments to micro/small (not medium) suppliers beyond the MSMED window |
| Effect | Deduction allowed in the year of actual payment — a timing hit with real cash impact |
| Window | 15 days without written terms; up to 45 with them |
| Companion | Companies also report delays via MSME-1 half-yearly |
Deliverables
The classified vendor master, MSMED-basis ageing, the exposure computation, the payment plan, and the working paper your tax auditor will ask for.
Information and documents generally required
Vendor master and ledgers, purchase terms/POs, Udyam certificates collected (formats provided), and payment runs.
Engagement process
Client responsibilities, assumptions and reliance
Vendor declarations must be sought in good faith (formats supplied); paying on time remains a treasury decision — the review prices procrastination, it cannot fund it.
Scope exclusions
Supplier-side recovery support runs under the Udyam engagement; disputes with vendors are commercial calls.
Frequently asked questions
Does this hit traders’ purchases too?
The provision targets sums payable to micro/small enterprises within MSMED discipline — the classification step applies the law to your actual vendor set rather than folklore.
Our vendor never told us they were MSME. Our problem?
Practically yes at year-end — which is why declaration collection is built into the vendor master rather than left to chance.
Is 43B(h) an expense disallowance forever?
No — it defers deduction to the payment year. The sting is timing and cash flow, plus the audit spotlight; both are manageable with the calendar.
Can we just sign 45-day terms with everyone?
Written terms help (they extend 15 to up-to-45) but cannot exceed the statutory cap — and the clock still runs. The plan works with real dates, not paper hopes.
The applicable scope, documentation, professional responsibilities and timelines are agreed in an engagement letter before commencement.
Udyam (supplier side)Tax AuditAgeing & BooksRequest a Scope DiscussionThis page describes the service in general terms as on 6 August 2026 and is not professional advice or an assurance of any outcome. Registrations, filings, refunds and departmental outcomes depend on facts and the concerned authority. Figures and due dates change; verify current positions before acting.
| Compliance | Due | Note |
|---|---|---|
| Udyam registration | Anytime — free | Unlocks 43B(h) protection, subsidies, tenders |
| Payment to MSEs (no agreement) | 15 days from acceptance | Section 15, MSMED Act |
| Payment to MSEs (with agreement) | 45 days maximum | Longer credit periods are void |
| MSME Form 1 (buyers) | 30 April / 31 October | Half-yearly return of overdues |
| 43B(h) year-end check | Before 31 March | Unpaid MSE dues get disallowed |
Dates as generally applicable on 15 July 2026; extensions/notifications can change them — confirm current dates before relying.