SECTION 43B(H) IN PRACTICE: INSTITUTIONAL DESIGN, CONTRACTUAL REALITY, AND LIQUIDITY OUTCOMES FOR MSMES IN POST-AMENDMENT INDIA
AUTHOR – SIDHESWAR JENA, PHD SCHOLAR (LAW) VIVEKANANDA GLOBAL UNIVERSITY- JAIPUR-INDIA. ORCID: HTTPS://ORCID.ORG/0009-0009-0234-5831
BEST CITATION – SIDHESWAR JENA, SECTION 43B(H) IN PRACTICE: INSTITUTIONAL DESIGN, CONTRACTUAL REALITY, AND LIQUIDITY OUTCOMES FOR MSMES IN POST-AMENDMENT INDIA, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (1) OF 2026, PG. 340-354, APIS – 3920 – 0001 & ISSN – 2583-2344.
Abstract:
The insertion of clause(h) to Section 43B of the Income Tax Act, 1961 represents a significant legislative intervention aimed at addressing habitual detainments in payments to micro and small enterprises (MSEs). By conditioning Tax deductibility on compliance with the payment timelines specified under the Micro, Small and Medium Enterprises Development Act, 2006, Parliament sought to realign marketable impulses in favor of timely agreement. While the statutory correction is now settled law, its functional effectiveness within India’s being executive, contractual, and financial armature remains under- examined. This composition undertakes a post-legislative evaluation of Section 43B(h), fastening on its commerce with MSME status verification under the Udyam frame, the treatment of retention plutocrat in corner- grounded contracts, liquidity constraints arising from the Goods and Services Tax governance, and the practical enforceability of correctional interest under the MSMED Act. The study argues that without reciprocal institutional design and systemic collaboration, Section 43B(h) pitfalls generating compliance query and liquidity stress rather than fulfilling its defensive ideal. The composition concludes by proposing design acquainted reforms aimed at operationalizing legislative intent while conserving marketable certainty.
Keywords: Section 43B(h), MSME payments, delayed payment, retention plutocrat, GST working capital, nonsupervisory design