Must Indian Brands Pay MSME Leather Manufacturers Within 45 Days?
Updated: 1 day ago
Usually, yes. As of October 2026, the MSME 45-day payment rule means that if your leather manufacturer is a registered micro or small enterprise, you must pay within 15 days of accepting the goods, or within an agreed period of up to 45 days. Pay later and the purchase is not tax-deductible until the year you pay.
Key Takeaways
As of October 2026, buyers must pay a registered micro or small leather manufacturer within 15 days of accepting the goods, or within written credit terms of up to 45 days.
The deadline comes from Section 15 of the MSMED Act, 2006; the Income-tax Act adds the buyer's penalty.
Pay late and the purchase is not tax-deductible until the year you actually pay; the supplier may also charge compound interest under Section 16.
The rule does not apply when the supplier is a medium enterprise or is registered only as a trader.
Check the supplier's Udyam certificate and clear unpaid MSME invoices before 31 March.
The Detailed Answer: How the MSME 45-Day Payment Rule Works
The rule comes from two laws working together. Section 15 of the MSMED Act, 2006 sets the deadline: 15 days from the day you accept the goods if there is no written agreement, and never more than 45 days even if you agree longer credit. The Income-tax Act then adds the penalty for buyers. It started as section 43B(h), added by the Finance Act, 2023, and is now section 37(2)(g) of the Income-tax Act, 2025, which came into force on 1 April 2026. In a Rajya Sabha reply on 21 July 2026, the Finance Ministry confirmed the rule still applies only to micro and small enterprises.
Your leather supplier is… | Payment deadline | If you pay late |
|---|---|---|
Micro or small manufacturer, no written credit terms | 15 days from accepting the goods | Purchase not deductible until the year you pay; interest may also be due to the supplier |
Micro or small manufacturer, written credit terms | Agreed date, 45 days at most | Same as above |
Medium enterprise | Your contract terms | Rule does not apply |
Registered only as a wholesale or retail trader | Your contract terms | Rule does not apply |
On leather footwear, jacket or upholstery orders, trouble usually starts with the 60 to 90-day credit many retailers and distributors expect. If a bill from a small manufacturer is still unpaid on 31 March, the deduction shifts to the next year, which can raise this year's tax bill. Under section 16 of the MSMED Act, the supplier can also charge compound interest on the late amount.
Before you place a bulk order, do three things:
Ask for the supplier's Udyam certificate and note whether it says micro, small or medium.
Put the payment milestones in the purchase order, for example an advance on order and the balance within 45 days of accepting the goods.
Before 31 March, check for unpaid MSME invoices so they are cleared in the same financial year.
For a fuller look at advance, TT and LC milestones on leather orders, see our guide to payment terms for leather orders from India.
Sanwas International is an LWG-certified OEM and private label leather manufacturer based in Jalandhar, Punjab, India, producing footwear, outerwear, furniture leather and hides for brands in India and worldwide. We make footwear, outerwear, furniture leather, leather hides and technical leather products for brands, retailers, wholesalers and corporate buyers across India and in export markets. MOQs are under 500 units per style, lead times run from 72-hour sampling to 30-day bulk, with AQL inspection before dispatch. See our manufacturing services, or talk to our team about your order and payment milestones.
Frequently Asked Questions
Does the 45-day rule apply if I pay my leather manufacturer an advance?
The clock only matters for money still owed after you accept the goods. An advance paid before production is not outstanding, so it is outside the rule. The balance is what counts: if you settle it within 15 days of accepting delivery, or within the written credit period of up to 45 days, your deduction is safe.
How do I check whether my leather supplier is a micro or small enterprise?
Ask for the supplier's Udyam Registration Certificate. It shows whether the unit is micro, small or medium and whether its main activity is manufacturing, services or trading. Re-check it each financial year, because a growing supplier can move up to medium and drop out of the rule.
Does the rule apply to retailers and wholesalers buying finished leather shoes for resale?
Yes. The rule is about who you buy from, not what you do with the goods, and your own MSME status does not matter. A retailer, distributor or D2C brand buying stock from a micro or small leather manufacturer has the same 15/45-day deadline. If the seller is registered only as a trader, the rule does not apply to that purchase.
Planning a Bulk Leather Order on Credit Terms? Get a Quote
Indian brands, retailers, wholesalers and corporate buyers: tell us the product, leather type, quantity, delivery city, target date and your preferred payment milestones.
Include these details in your enquiry:
Product category and style (footwear, jacket, upholstery leather, hides or crust)
Leather type, finish and colour
Target quantity per style and colour
Delivery city in India or destination country, plus preferred Incoterm
Target delivery date and whether you need a sample before bulk
Contact Sanwas International
Mob: +91 8728858686
Address: 308 Leather Complex, Kapurthala Road, Jalandhar, Punjab 144002, India
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