Steps for Complying with Section 43B(h) Reporting Requirements

Step 1: Collect Year-End Balances

Gather the complete list of year-end balances of trade payables as of March 31, 2024, and ensure they are accurate.

Step 2: Identify Payables to Micro and Small Enterprises (MSEs)

Determine the amounts payable to micro and small enterprises under Section 43B(h). Keep in mind:

- The supplier must be engaged in manufacturing, producing goods, or providing services. Suppliers who are traders (merely buying and selling goods) do not fall under Section 43B(h). Refer to Section 2(e) of the MSMED Act for the definition of "enterprise."

- The supplier should be registered with Udyam Authority to be covered under the MSME Act.

- MSME registration applies from the registration date. For example, if a supplier registered on October 1, 2023, only supplies made after this date are eligible. This was confirmed by the Supreme Court in Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd. (2023) 6 SCC 401.

Step 3: Exclude Certain Balances

Remove the following from your list of year-end payables:

- Balances from previous years.

- Payables for capital goods on which depreciation is claimed. However, if 100% deduction is claimed under Section 35AD, the balance should be included.

- Balances related to GST should be excluded if GST credit is claimed (exclusive method).

Step 4: Calculate Payment Deadlines Under the MSMED Act

Determine the due date for payment:

- If there is a written agreement, use the agreed number of days or 45 days from the date of acceptance of goods/services, whichever is earlier.

- Without a written agreement, the deadline is 15 days from the date of acceptance.

Step 5: Report Overdue Trade Payables

Total the year-end trade payable balances that exceed the payment deadlines under the MSMED Act. Report these amounts in sub-clause (b) of clause 22 in Form 3CD.

Best Practices for Compliance

- Taxpayers and auditors should keep detailed records of all reported amounts and trade payable balances as shown in the balance sheet.

- For additional guidance, refer to the Implementation Guide on Revision in Form 3CD and Form No. 3CEB (March 2024) issued by the Institute of Chartered Accountants of India.

Disclaimer: This content is for informational purposes only and does not constitute professional advice. Please consult a tax advisor or legal expert for personalized guidance.