/ Tax Compliance Matters: The New MSE Supplier Payment Rules

For foreign companies operating in India through subsidiaries, keeping up with the country’s evolving tax regulations is crucial for maintaining compliance and avoiding penalties. One recent amendment that has garnered significant attention is the change in tax provisions related to payments made to Micro and Small Enterprise (MSE) suppliers.

The Finance Act of 2023 introduced a new section, 194R, which mandates deduction of tax at source (TDS) on payments exceeding Rs. 50,000 made by any person to a resident MSE supplier. This amendment aims to bring MSE suppliers into the tax net and promote tax compliance within this segment.

Sanjeev Kumar, General Manager of Corporate Services at Maier Vidorno Altios, a leading global consulting firm, emphasizes the importance of this amendment for foreign companies with Indian subsidiaries. “The new tax provision underscores the need for foreign entities to stay abreast of India’s dynamic tax landscape,” he says. “Failure to comply can result in substantial penalties and reputational damage.”

Kumar explains that the amendment not only affects direct transactions between foreign companies and MSE suppliers but also extends to payments made by their Indian subsidiaries. “Foreign companies must ensure that their Indian subsidiaries are fully compliant with the new TDS requirements when making payments to MSE suppliers,” he advises.

Navigating the complexities of India’s tax regulations can be a daunting task, especially for foreign companies unfamiliar with the local legal and regulatory environment. This is where Maier Vidorno Altios can provide invaluable assistance. “Our team of tax experts and legal professionals are well-versed in the intricacies of India’s tax laws,” Kumar states. “We can help foreign companies and their subsidiaries implement robust compliance processes and mitigate risks associated with non-compliance.”

Maier Vidorno Altios offers a range of services tailored to the needs of foreign companies operating in India, including tax advisory, compliance management, and risk assessment. “We take a proactive approach, continuously monitoring regulatory changes and updating our clients on the implications for their businesses,” Kumar explains.

As the Indian government continues to enhance its tax compliance measures, foreign companies must prioritize adherence to the evolving regulations. By partnering with experienced consultants like Maier Vidorno Altios, they can navigate the complexities of the Indian tax landscape with confidence and ensure their operations remain fully compliant.