The MSME Development Act, 2006 (MSMED) makes sure that small businesses get paid on time. If a company makes a delay in paying the debts to the Micro, Small, and Medium Enterprises (MSMEs), they have to explain the reason for the delay. According to Section 15 of the MSMED Act, if a supplier gives goods or services to a buyer, the buyer should pay by the agreed date. If there’s no agreed date, the buyer must pay within 15 days of accepting the goods or services, and sellers can’t give buyers more than 45 days to pay from when they get the goods or services or the date of deemed acceptance.
Hence, on January 22, 2019, the Ministry of Corporate Affairs (MCA) issued a notification stating that certain companies with unpaid debts to Micro, Small, and Medium Enterprises (MSMEs) must submit details of these outstanding dues using Form MSME-1 to the Registrar of Companies (ROC).
To comply with this requirement, companies must first determine whether their suppliers are registered under the MSME Act of 2006. If the suppliers have indeed registered under this act and there are any outstanding amounts overdue for 45 days that the company still needs to pay to these MSME suppliers, then Form MSME-1 must be filed accordingly.
Classification OF MSME
Revised Classification applicable w.e.f. July 1, 2020
Composite Criteria: Investment in Plant and Machinery/equipment and Annual Turnover
Â
Classification/ Criteria | Investment in Plant and Machinery or Equipment & | Turnover |
MICRO | Upto ₹ 1 Cr | Upto ₹ 5 Cr |
SMALL | Upto ₹ 10 Cr | Upto ₹ 50 Cr |
MEDIUM | Upto ₹ 50 Cr | Upto ₹ 250 Cr |
Â
Note: Please note that both criteria (Investment in Plant and Machinery or Equipment AND Turnover) needs to be fulfilled in order to check classification
Purpose of Filing
Form MSME-1 is filed by companies for disclosure of their outstanding dues to Micro and Small Enterprises (MSEs) suppliers. The purpose of filing Form MSME-1 is to ensure timely payment to MSMEs and to promote their growth and sustainability by providing them with a mechanism to track payments due from large companies. The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, which requires buyers to pay MSMEs on time, is monitored and enforced with the use of this form. Companies must tell the government if there is a delay in paying the debts to the Micro, Small, and Medium Enterprises (MSMEs), more than 45 days. This is done by filing a form called MSME-1 every six months. This helps the government track who owes money to small businesses. If a company doesn’t owe anything, they don’t need to file this form.
Who Should File Form MSME-1?
- Companies that have bought goods or services from MSMEs suppliers and
- The payments to MSMEs suppliers are overdue by more than 45 days after accepting the goods or services.
Details to be Reported in Form MSME-1
- Company’s Corporate Identification Number (CIN) and Permanent Account Number (PAN).
- Company’s name, address, and email.
- Suppliers’ names and PAN.
- Amount owed for goods or services.
- Date when the payment became due.
- Reason for delay in payment of the due amount.
Due Date for Filing Form MSME-1
The MSME-1 form is submitted to the MCA every six months, as per below
Period | Due Date |
October to March | 30th April |
April to September | 31st October |
Non-Compliance of Filing Form MSME-1
If a company doesn’t follow an order from Section- 405 subsections (1) or (3) of the Companies Act, 2013 or gives wrong or incomplete information that’s important,
Penalty on Company
Fine upto ₹ 25,000/-
Penalty for Responsible Officer
Fine of ₹ 25,000 to Maximum ₹ 3,00,000/-
Or
Imprisonment for a term upto 6 Months
OrÂ
Both
Legal Terminus (www.legalterminus.com) offers significant assistance in filling out Form MSME-1 in a hassle-free and timely manner. Reach out to our team right now to take advantage of our expert services and effectively fulfill your legal and regulatory requirements.
Disclaimer:
This article, dated April 5, 2024, provides a general overview of the e-form MSME-1 form filing guidelines. It is not legal advice, and readers are encouraged to seek professional advice for the most current information and personal guidance. The author and publisher disclaim any and all liability for errors or omissions in this article.
Prepared by
Mr. Smruti Ranjan Sahoo,
B.Com, LL.B.
