New Form MSME-1, When to file and who is to file

This article explains everything you need to know about Form MSME-1, a mandatory filing for companies that owe outstanding payments to Micro, Small, and Medium Enterprises (MSMEs) for more than 45 days.

Background

The Ministry of Corporate Affairs (MCA) introduced Form MSME-1 in 2019 to strengthen regulations regarding delayed payments to MSMEs. This requirement ensures transparency and promotes timely payments to these crucial businesses.

Who Needs to File Form MSME-1?

Companies must file Form MSME-1 if they meet the following criteria:

• They have obtained goods or services from a registered MSME supplier.
• They have outstanding payments exceeding 45 days from the date of accepting the goods or services (or the deemed acceptance date).

Effective from 15 July 2024, amendment mandates that only those specified companies with payments pending for more than 45 days to any micro or small enterprises must furnish the required information in MSME Form-1.

Understanding the MSME Development Act (MSMED) Provisions

The MSMED Act, 2006, sets a maximum credit period of 45 days for payments to MSMEs. It also mandates companies to disclose reasons for delayed payments in their financial statements.

Key Sections of the MSMED Act

• Section 15: Specifies that payments to MSMEs should be made on the agreed date (if any) or within 15 days of acceptance (deemed acceptance). It also restricts the credit period granted by the seller to a maximum of 45 days.
• Section 43B clause h of Income Tax Act 1961 applicable from 1 April 2023: Pertains to the treatment of payments to MSMEs for tax purposes.

Purpose of Filing Form MSME-1

• Enables the Registrar of Companies (ROC) to track companies with outstanding dues to MSMEs.
• Provides transparency regarding delayed payments and helps MSMEs receive timely payments.

Important Points to Note

• Companies are not required to file a “Nil MSME-1 Return” if they have no outstanding dues to MSMEs.
• The MSME-1 filing applies only to outstanding payments exceeding 45 days.

Details Reported in Form MSME-1

Please report all outstanding amount that are due for more than 45 days or were liquidated after 45 days of acceptance of goods/service

When filing Form MSME-1, companies must provide:

• Company’s CIN (Company Identification Number) and PAN (Permanent Account Number)
• Company’s name, address, and email address
• MSME supplier’s name, address, and PAN
• Outstanding amount due for the supplied goods or services
• Date from which the amount is outstanding
• Reason for the delay in payment

Due Dates for Filing Form MSME-1

Form MSME-1 is a half-yearly return with specific filing deadlines:

• April-September Period: Due by October 31st
• October-March Period: Due by April 30th

Consequences of Non-Compliance

Failing to file Form MSME-1 attracts penalties under Section 405(4) of the Companies Act, 2013:

• Penalty for Non-Filing: Rs. 20,000 for the company and every responsible officer.
• Penalty for Continued Non-Filing: An additional Rs. 1,000 per day, subject to a maximum of Rs. 3 lakh.

Form MSME 1:

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