CICU urges Centre for urgent policy relief as US–Israel–Iran war disrupts exports, seeks Section 43B (h) exemption

Ludhiana, March 2 , 2026: The Chamber of Industrial & Commercial Undertakings (CICU) today raised a pressing alarm over the deteriorating geopolitical situation in the Middle East — marked by hostilities involving the United States, Israel and Iran — and its cascading impact on India’s export-oriented industrial clusters, particularly the MSME-driven textile, engineering and allied sectors.
In an urgent representation to the Ministry of Finance, Ministry of Commerce and Industry and Ministry of Textiles, CICU has sought immediate exemption from the applicability of Section 43B (h) of the Income Tax Act for exporters targeting Middle East markets, citing exceptional disruptions to shipping, logistics and payment cycles triggered by the conflict.
Recent developments have seen a sharp escalation in hostilities following military action by the United States and Israel against Iranian targets and ensuing retaliatory strikes by Iran, which have significantly affected key global trade arteries such as the Strait of Hormuz — a vital chokepoint for about 20 per cent of the world’s crude and energy shipments.
Industry bodies have reported that port operations at major hubs in the Gulf, including Jebel Ali — a critical re-export and distribution center for Indian garments, yarns and auto components — are facing unprecedented delays and congestion. With maritime traffic under threat and insurers escalating war-risk premiums, the traditional 45-day payment cycles between exporters and domestic suppliers have become untenable.
“The disruption of maritime routes and the uncertainty in logistics makes it impossible to adhere to Section 43B (h)’s mandate for payment to domestic MSME suppliers within 45 days, especially when export realisation itself — under FEMA guidelines — can extend up to 15 months,” CICU President Upkar Singh Ahuja said. “We are urging the Government of India to urgently align domestic payment requirements with FEMA’s export realisation timelines and to grant permanent exemption from Section 43B (h) for exporters affected by this geopolitical crisis.”
Under the Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) regulations, exporters are typically allowed up to 15 months to realise export proceeds. In stark contrast, Section 43B (h) of the Income Tax Act treats supplier payments made after 45 days as non-deductible, effectively penalising exporters stranded by global disruptions beyond their control.
“This contradiction between tax law and foreign exchange regulations — at a time when geopolitical instability has severely disrupted global supply chains — creates a severe liquidity gap for exporters,” Ahuja added. “Unless this anomaly is corrected with immediate policy support, MSME exporters could face critical financial stress, damaging output, employment and India’s export competitiveness.”
CICU’s representation has been backed by a detailed presentation submitted to the ministries of Finance, Commerce & Industry, Textiles, and senior policy departments, including the Directorate General of Foreign Trade, highlighting the urgent need for relief measures. The chamber has also called for harmonising payment timelines with realisation periods permitted under FEMA, and a permanent exemption from Section 43B (h) for Middle East-bound exports.
Industry officials and exporters have already signalled the impact of the conflict on global logistics networks, with freight, transit and insurance costs rising and shipping routes being altered to avoid high-risk zones like the Red Sea and the Persian Gulf. Reports indicate that exporters may need to reroute shipments via longer passages such as the Cape of Good Hope, adding significant delays and cost burdens.
Ahuja emphasised that MSME-driven textile and engineering clusters, which form the backbone of Punjab’s industrial output and employment base, are especially vulnerable. “These sectors are price-sensitive and heavily reliant on predictable shipping and payment cycles. A prolonged conflict that paralyzes trade corridors could severely damage their viability,” he said.
CICU has reiterated its unwavering commitment to representing and defending the interests of the industrial and business community. The chamber has urged the Government of India to immediately engage with relevant ministries and departments to address the policy contradiction that threatens the sustainability of export clusters in the face of evolving global risks.
“The survival and competitiveness of India’s exporters — particularly MSMEs — depend on responsive and pragmatic policy interventions,” General Secretary Honey Sethi stated. “We trust that the Government will take swift action to ensure India’s industrial growth remains uninterrupted even during times of international crises.”