Section 43Bh Disallowance

[JishnuKumar S]

Dear Experts,

I have a query regarding the partial payment disbursement to an MSME vendor. In our organization, we are encountering issues with vendors who are non-filers from a GST perspective. Is it possible to withhold the GST portion while releasing the payment? If so, what are the potential disallowence of doing so?

Regards

JK

AI Summary

Disallowance under Section 43Bh: withholding GST from payments to non-filing micro or small vendors risks disallowance.
Section 43Bh disallows any sum payable to a micro or small enterprise remaining unpaid beyond the statutory time limit, and the statutory phrase "any sum payable" is interpreted to include the GST component; thus withholding GST when paying a micro or small vendor can attract disallowance. The provision excludes medium enterprises. An alternative operational view notes that if GST is not reflected due to supplier non-filing, GST may be treated separately in a suspense account, reducing the amount considered payable to the vendor and potentially lowering the disallowance.