TLDR;
This video explains the MSME (Micro, Small & Medium Enterprises) payment rule and clarifies common misconceptions about its applicability. It highlights that any business, regardless of its size or MSME registration status, must adhere to the 45-day payment rule if it procures goods or services from an MSME-registered supplier. Failing to comply can result in a 30% tax on the unpaid amount. The video emphasizes the importance of verifying the MSME registration status (Udyam Certificate) of suppliers to avoid penalties and provides a real-life example of the consequences of non-compliance.
- All businesses must follow MSME rules if they buy from MSME-registered suppliers.
- The 45-day payment rule applies regardless of the buyer's size, audit status, or MSME registration.
- Failure to pay within 45 days can lead to a 30% tax on the unpaid amount.
- Always verify the Udyam Certificate of suppliers to ensure compliance.
Introduction: Understanding the MSME Payment Rule [0:00]
The video introduces the MSME payment rule and addresses the confusion surrounding its applicability to businesses, especially small ones. It warns that non-compliance can lead to a 30% tax on expenses and emphasizes the importance of understanding and adhering to the rule to avoid penalties and income tax calculation issues. The video aims to clarify whether the 45-day payment rule applies to all businesses, even those not registered under MSME.
Applicability of MSME Rules to All Businesses [0:41]
The video clarifies that the MSME rules apply to all businesses, regardless of size, if they purchase goods or services from MSME-registered suppliers. The key factor is the supplier's MSME registration, specifically if they possess an Udyam Certificate. Section 15 of the MSME Law mandates that buyers must pay MSME-registered suppliers within 45 days. The rule applies to all buyers, big or small, and suppliers must fall under the micro or small enterprise category with an Udyam Certificate.
Debunking Myths: Audit Status and MSME Registration [2:21]
The video addresses the misconception that the MSME payment rule only applies to audited businesses. It emphasizes that the rule applies equally to all businesses, regardless of their audit status. Additionally, the video clarifies that the buyer's MSME registration status is irrelevant; the rule is triggered by the supplier's MSME registration. Therefore, even if a business is not MSME-registered, it must comply with the 45-day payment rule if its supplier is MSME-registered and possesses an Udyam Certificate.
Consequences of Non-Compliance: A Real-Life Example [3:55]
The video illustrates the consequences of non-compliance with a real-life example of Mahesh Bhai, who owns a small printing press. Despite not being under audit, Mahesh Bhai faced a ₹24,000 loss due to a 30% tax on an ₹80,000 purchase from an MSME-registered paper manufacturer because he paid after 3 months and was unaware of the supplier's MSME status. This example underscores the importance of verifying the MSME registration of suppliers to avoid unexpected tax liabilities.
Solution: Verifying Supplier's Udyam Certificate [4:41]
The video provides a practical solution to ensure compliance: businesses should always request an Udyam Certificate from new suppliers and obtain updated certificates from both new and old suppliers annually. By verifying that suppliers fall under the micro or small enterprise category, businesses can ensure they adhere to the 45-day payment timeline and avoid tax-related surprises.
Future Considerations: Exceptions and Upcoming Information [5:17]
The video concludes by mentioning that there are exceptions to the 45-day payment rule, which will be explained in the next video. It also announces the upcoming launch of an application where the 45-day payment rule is not applicable, encouraging viewers to subscribe to the channel for more important information.
