Vendor Management | MSME 43B(h) Compliance

Section 43B(h), enforced at the vendor. Udyam verified live.

Udyam registry verified at vendor onboarding and re-checked at every bill capture. The 45-day clock starts at the invoice date. The payment scheduler enforces the rule. Section 43B(h) disallowance surfaced before any override.

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How it works

Udyam, the 45-day clock, and the scheduler.

Step 01

Udyam verified at onboarding

Every new vendor's Udyam registration checked against the live Udyam registry. Status (micro / small / medium / not-registered) stored on the vendor master.

Step 02

Re-verified at bill capture

Each bill triggers a re-check. Vendors who became MSME mid-year are caught at the next bill, not at FY-end.

Step 03

Clock starts at invoice date

The 45-day window (or 15 days where no written agreement exists) is computed from the invoice date per Section 15 of the MSMED Act.

Step 04

Scheduler enforces

Bills approaching the 45-day window are auto-prioritised in the next payment run. Bills past the window block the run with the disallowance impact and penal-interest exposure shown.

Step 05

Override captured

If a payment must be released past the window, the override surfaces the exact disallowance amount and penal interest. The override is captured with reason, approver and audit trail.

What the system does

Capability, input, output.

Capability	Input	Output
Udyam live check	Vendor Udyam number	Micro / small / medium / not-MSME status
Re-verification cadence	Bill capture event	Updated MSME status per bill
45-day clock	Invoice date + agreement terms	Due-by date stored on the bill
Payment scheduler gate	Bill due-by date + run date	Block / prioritise / allow with override
Disallowance computation	Bill amount + tax position	Disallowed amount per Section 43B(h)
Penal interest tracker	MSMED Act Section 16	Interest accruing per bill, daily
FY audit pack	All MSME bills + payment timing	Hash-verified report for tax audit

Udyam live check

Input

Vendor Udyam number

Output

Micro / small / medium / not-MSME status
Re-verification cadence

Input

Bill capture event

Output

Updated MSME status per bill
45-day clock

Input

Invoice date + agreement terms

Output

Due-by date stored on the bill
Payment scheduler gate

Input

Bill due-by date + run date

Output

Block / prioritise / allow with override
Disallowance computation

Input

Bill amount + tax position

Output

Disallowed amount per Section 43B(h)
Penal interest tracker

Input

MSMED Act Section 16

Output

Interest accruing per bill, daily
FY audit pack

Input

All MSME bills + payment timing

Output

Hash-verified report for tax audit

Compliance + integrations

The income-tax pin and the underlying obligation.

Section 43B(h) is the income-tax pin. The MSMED Act is the underlying obligation. Both enforced at the bill, not at the audit.

Regulations we work within

Section 43B(h), Income Tax Act

Disallowance of MSME payments past 45 days, computed per bill.
MSMED Act, Section 15

45-day rule (15 days where no written agreement), based on invoice date.
MSMED Act, Section 16

Penal interest at 3x the RBI bank rate, compounded monthly.
MSMED Act, Section 23

Interest paid to MSME vendors disallowed under Section 23.
Form 3CD, Clause 22

Tax-audit disclosure of MSME payment timing, pre-populated.

Connects to

Udyam Registry Live verification
Tally Prime Bidirectional sync of MSME flag

MSME 43B(h) Compliance FAQ

What buyers ask.

Some vendors don't share Udyam. How do we know if they're MSME?

Vendor portal asks every vendor for Udyam. Vendors who don't respond can be checked by name + PAN against the Udyam registry directly. Silent vendors are tagged "unverified" (not "non-MSME") so the AP team knows the position is uncertain.

What if a vendor's MSME status changes mid-year?

A vendor moving from "not-MSME" to "micro" or from "small" to "medium" is caught at the next bill capture. Bills already in flight retain the captured status; new bills use the updated. Transition is in the audit trail.

Can the CFO override the block?

Yes. Override surfaces the exact disallowance under Section 43B(h) and penal interest under MSMED Section 16, with the dual-control approver chain. Override decision, reason and trail captured for tax audit.

Form 3CD Clause 22. Pre-populated?

Yes. Clause 22 (MSME payment timing) drafted from the system's bill-level MSME flags and payment dates. CA reviews and finalises with DSC. Supporting workpaper exportable as a hash-verified audit pack.

Related features

See your MSME exposure tonight.

Connect your vendor master, free. The Udyam check runs across every vendor by morning. The 45-day clock starts from the next bill. Disallowance becomes a number you watch, not a number you discover.