45-day payment rule: New fund will work with banks to help MSME units, says FM Sitharaman

The union government is working on a new fund which would work with banks to see that MSME units would continue to receive support if any of them faced financial distress due to delayed payments from their customers, Finance Minister Nirmala Sitharaman said on Sunday. She was referring to the new clause, Section 43B(h) of the Income tax act 1961, which requires traders to clear the bills of MSME units within 45 days of purchase or lose benefits of deduction. The new rule came into force from April 1 this year, but MSME units had appealed to the finance ministry to review it fearing loss of business.

The banks will continue to support them with working capital needs and help them overcome their distress situations, she said, addressing a media conference in Bengaluru.

The Budget, the FM said, had recognized the needs of the MSME sector and has facilitated bank loans to the MSME units for the purchase of machinery and equipment without any collateral or third-party guarantee.

The sector, Sitharaman said, had complained that the banks did not understand their turnover cycle or the way they did their business, so had two minds about supporting them. Banks, she added, would now work on this, and the government had also provisioned for SIDBI to open new branches across the major MSME clusters.

Space Startups: The Rs 1000 crore venture capital fund that the Budget has announced for the space sector will support startups and private companies in Bengaluru. The FM said angel tax, introduced by the UPA regime in 2012, was a big grievance of the startup founders, and the Centre has abolished it in the recent budget. India’s tech-savvy youth will see new avenues as the Anusandhan National Research Fund of Rs 1 lakh crore will support the private sector driven research and innovation. Bengaluru, Sitharaman added, will play a key role in developing and expanding digital public infrastructure (DPI) across agriculture and other sectors so that it reaches the proportions of digital payments.