Companies to file Return for Delayed Payment to MSME

Introduction:

The Central Government under section 9 of Micro, Small and Medium Enterprises Development Act, 2006 (MSMEDA-2006) empowers to issue notification, programmers, guidelines and instructions for the promotion and development of the competitiveness of micro, small and medium enterprises.

Using the powers mentioned under section 9 of MSMEDA-2006 the ministry of micro, small and medium enterprise issued the notification S.O. 5622(E) dated 2nd November 2018, wherein all the companies dealing with such enterprises were required to fill return to Ministry of Corporate Affairs stating the following details:

  1. The Amount payments due; and
  2. The reason of the delay.

With reference to the notification issued by MEMEDA-2006, Ministry of Corporate Affairs on 22nd day of January 2019 issued notification no. S.O. 368(E) under which Ministry of Corporate Affairs using the power define under section 405 of Companies Act, 2013 Central Government make order called as “Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019. Under this order every specified company is required to file MSME Form I.

If you have been receiving goods and services from the micro, small and medium enterprise, you must read this article as it will throw light on the requirements and conditions of filing MSME form1. When filing this form, make sure your information is correct. Incomplete or incorrect information may result in penalties.

Here’s all that you need to know:

What is MSME FORM I return?

MSME Form I is the half yearly return to be filled by every specified company with the Registrar of companies. This return contain detail of all the outstanding payments to the micro and small for the goods and services supplied by them. All the payments which is due from more than 45 days needs to be reported under this return.

Details to be covered under MSME form I

Apart the basis details required of reporting entity, form MSME – I also required details related to:

(a) the total amount of payment due; and

(b) the reasons for the delay;

The above-mentioned detail is required to be provided in below tabular format.

Financial Year/Particulars Name of suppliers PAN of suppliers Amount Due Specify the date from which amount is due

Due dates of MSME FORM I

As per the specified companies (Furnishing of information about payment to micro and small enterprises supplier) order, 2019 following are the due dates for MSME Form I

  1. Initial return – with 30 days of publication of notification (i.e. 21st Feb 2019)
  2. Half Yearly Return
      • Half yearly for the period April to September – 31st October
    • Half yearly for the period October to March – 30th April

Who is specified company for MSME FORM I

All the companies will have to file MSME – 1 if following conditions are satisfied.

    1. Who get supplies of goods or services from Micro and Small Enterprises and
  1. Whose payments to Micro and Small Enterprises Suppliers exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services

Such companies will be called as specified companies.

Micro and small companies are covered and not medium enterprises

As per the notification, outstanding dues to only Micro and small enterprises will have to be reported. As per MSME Act following table will be help full to understand the difference between Small, Micro and Medium enterprises.

Type of enterprises Investment in Plant & Machinery MSME-1 applicability
Manufacturing activities Services activities
Small enterprises Up to 25 lacs Up to 10 lacs MSME-1 applicable
Micro enterprises More than 25 lacs but up to 5 crore More than 10 lacs but up to 2 crore MSME-1 applicable
Medium enterprises More than 5 crores but up to 10 crores More than 2 crores but up to 5 crore MSME-1 not applicable

How to calculate 45 days for outstanding

As per Explanation given under Sec 2(b) of The Micro, Small and Medium Enterprises Development Act, 2006,the day of acceptance or the day of deemed acceptance has been explained as below.

THE DAY OF ACCEPTANCE means, –

(a) The day of the actual delivery of goods or the rendering of services; or

(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;

THE DAY OF DEEMED ACCEPTANCE means

where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services;

Penalties for non filing of MSME-01 Form?

As per section 405(4) if the companies fail to comply with as order or knowing furnishes or statistics which is incorrect or incomplete in any material respect, the company will be punishable as given in below table.

In other words, non-filing of MSME – 01 form or giving incorrect or incomplete form in any material aspect, following penalties may be levied for MSME-01 Form

Particulars Penalty
on defaulting company Extended up to Rs. 25000
Every officer who is in default Minimum fine Rs. 25000 which may extend to Rs. 300000
or
Imprisonment which may extended to 6 months.
or
both

Conclusion:

Hence it is recommended that you handle the financial dealings with the micro, small and medium scale enterprises carefully and gain knowledge of the form beforehand in order to avoid any hassle while filing the form.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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