NEW DELHI: A Chennai-based exporter operating multiple branches was forced to deregister one of the companies registered with Udyam – the portal for micro, small and medium enterprises – as some large buyers did not want to fall into the government order that requires actual payment of all dues to SMEs within 45 days to avail tax deductions on expenses.

There are several such companies across the country complaining that the government's well-intentioned measure to ensure timely payments is being used to the detriment of small business owners who have little negotiating leverage with the large corporations that dictate their terms of pricing and payments.

In addition, there were others who said the norms went against established business practices in their sectors or in certain parts of the country where payments with a notice period of 60 to 90 days were the norm.

The issue also caused great tension at Finance Minister Nirmala Sitharaman's preparatory meeting with representatives of the sector, as companies were divided on the issue.


Official sources said that the feedback from small businesses would be taken into account and the central government would adjust the norms in the budget as the changes were incorporated through the Finance Act.

“The government is looking at ways to create flexibility, but a decision on the modalities is yet to be taken,” an official said, amid calls to even delay implementation of the provision.

While Sitharaman had announced that the scheme would be implemented from the financial year 2023-24, it was only at the end of the last financial year that chartered accountants and small business owners became aware of it. By the time the issue was raised with the finance ministry, the election process was already underway, leaving the government unable to intervene.