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Quick Settle: A Win-Win for Buyers and MSMEs?


Quick Settle

India's Economic Engine: The Power of MSMEs 

The Indian economy is undergoing a phenomenal transformation, positioning itself as a global powerhouse. This growth is fueled by the remarkable expansion of its industry and business sectors. At the heart of this transformation lie the Micro, Small, and Medium Enterprises (MSMEs), as per the Ministry of Statistics & Programme Implementation, the share of MSME Gross Value Added (GVA) in all India Gross Domestic Product (GDP) during the year 2021- 2022 has been close to 29%, accounting for roughly one-third of the country's manufacturing output, MSMEs play a critical role. 

Furthermore, partnerships and collaborations between MSMEs and larger corporations have fostered a mutually beneficial ecosystem. These linkages not only drive individual business growth but also contribute significantly to the nation's overall economic development. 

Challenges and Opportunities: Supporting a Thriving MSME Sector 

Looking ahead, policymakers, industry leaders, and financial institutions must continue to support the MSME sector. Favorable policies, infrastructure development, and skill enhancement initiatives are crucial. By harnessing the full potential of MSMEs, India can solidify its position as a global economic powerhouse, driving sustainable growth and inclusive development. 

However, despite various policies augmenting MSME growth and fostering a congenial business environment, an omnipresent challenge remains: Delayed Payments; coupled with limited access to working capital, it forms an obnoxious blend of detrimental factors, exacerbating the predicament of the MSME Industry. According to data from the Ministry of Micro, Small, and Medium Enterprises, the total value of cases pending before the MSE Facilitation Council exceeds Rs. 24,000 Cr. 

The Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act) introduced accelerated resolution mechanism to alleviate and address such issues. However, its effectiveness has been limited due to a mounting backlog of cases. While, Section 15 of the MSMED Act mandates a time-bound repayment period and Section 16 mandates compounding interest on delayed payments, such laws significantly impact business relationships between buyers and MSMEs. 

Incentivizing Timely Payments: A Step Forward 

To promote a favorable business environment and encourage timely repayments, the Finance Act of 2023 introduced an amendment to the Income Tax Act of 1961. This amendment supplements Section 43B of the Income Tax Act with subsection (h), allowing buyers to claim income tax benefits on remitted, delayed payments made to MSMEs. 

This amendment represents a crucial step towards incentivising prompt payment practices within the business ecosystem. By offering income tax benefits to buyers, the amendment aims to stimulate adherence to payment deadlines. This assuages the burden of delayed payments on MSMEs and facilitates smoother business transactions. 

Beyond Immediate Solutions: A Supportive Environment for MSMEs 

Beyond addressing immediate concerns, this amendment underscores diligent efforts in nurturing a supportive environment for MSMEs. It reflects a proactive approach to mitigate challenges faced by MSMEs and promotes their seamless integration into the broader economic landscape. 

Moreover, by incentivising timely repayments, the amendment is expected to enhance trust and reliability in business relationships thereby fostering a culture of mutual respect and cooperation between buyers and MSMEs, likely leading to increased investment, innovation, and growth within the MSME sector, thereby contributing to overall economic development. 

Quick Settle: A Catalyst for Growth 

In light of these recent developments, Quick Settle offers added advantages tailored to meet the needs of both buyers and MSMEs, fostering a mutually beneficial relationship within the business ecosystem. As a product, Quick Settle not only facilitates prompt payments but also allows enhanced financial flexibility and creates a conducive business environment. MSMEs can continue business relations unhindered, while Quick Settle takes care of delayed payments. 

 

A Balanced View: Pros and Cons of Quick Settle 

In the realm of business transactions, Quick Settle emerges as a solution designed to streamline and further facilitate payment processes between buyers and Micro, Small, and Medium Enterprises (MSMEs). While it offers several advantages for both parties involved, it's essential to delve into the nuances to grasp its full implications. 

Benefits for Buyers: 

Financial Flexibility: 

Quick Settle empowers buyers with access to loans from partnered Non-Banking Financial Companies (NBFCs) featuring flexible repayment structures. This provision enables buyers to fulfill their obligations to MSMEs promptly, thereby avoiding disruptions in the supply chain. 

Tax Advantages: 

If buyers utilise Quick Settle before the end of FY 2022-23, they can claim deduction benefits, under Section 43B(h) of the Income Tax Act, 1961 (for delayed payments made to MSMEs), under Income Tax Returns to be filed by the end of FY 2022-23. If buyers choose to avail Quick Settle and remit outstanding dues after the end of FY 2022-23, such deductions under Section 43B(h) of the Income Tax Act, 1961 can be sought under Income Tax Returns to be filed by the end of the next FY. In a nutshell this not only incentivizes prompt payments but also enhances cash flow management for buyers.  

Buyers availing Quick Settle also have the added advantage of further seeking deductions on the amount loaned (through our partnered NBFC) under Section 43B(da) of the Income Tax Act, 1961. 

Benefits for MSMEs: 

Faster Payments: One of the primary advantages of Quick Settle is its ability to ensure that dues from buyers are remitted on Day 0, thereby eliminating delays in payment processing. This feature significantly improves operational cash flow for MSMEs, alleviating financial strain. 

Reduced Risk of Bad Debt:  By expediting payments, Quick Settle effectively reduces the risk of bad debt for MSMEs. With a steady and predictable cash flow, MSMEs can focus more confidently on their core business activities, driving growth and innovation. 

Conclusion: Fostering Growth Through Collaboration 

In essence, Quick Settle streamlines payment processes, enhances financial liquidity for both buyers and MSMEs, and provides a framework for maximizing tax benefits under the Income Tax Act, 1961. By carefully assessing its implications and adopting prudent practices, businesses can leverage Quick Settle to foster growth and efficiency in their operations. 

 


FAQs 

How does Quick Settle differ from traditional payment systems? 

Quick Settle offers immediate remittance of dues, financial flexibility for buyers, and tax advantages, distinguishing it from conventional methods. 

Are there any eligibility criteria for MSMEs to join Quick Settle?

MSMEs of all sizes and sectors can benefit from Quick Settle, provided they meet the platform's registration requirements. 

Can buyers claim tax benefits for payments made through Quick Settle? 

Yes, buyers can claim deduction benefits under specific sections of the Income Tax Act, 1961, for payments facilitated through Quick Settle. 

How does Quick Settle contribute to the growth of MSMEs? 

By ensuring timely payments and enhancing financial stability, Quick Settle empowers MSMEs to focus on growth and innovation. 

Is Quick Settle accessible nationwide? 

Yes, Quick Settle is accessible across India, facilitating seamless transactions between buyers and MSMEs nationwide. 


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