CA Mayank Agarwal
Revised Presentation of Trade Payables in Financial Statement prepared according to the Schedule III of the Companies Act, 2013.
Introduction
In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the some alterations in Schedule III to the Companies Act, 2013 (Notification dated 4th September, 2015).
1. Applicability
Companies registered under the Companies Act, 1956/2013 are required to prepare financial statement according to the Schedule III of the Companies Act, 2013.
2. Definition of Various terms under The Micro, Small and Medium Enterprises Development Act, 2006
“Appointed day”
Means the day following immediately after the expiry of the period of fifteen days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.
Explanation – For the purpose of this clause,-
(i) “the day of acceptance” means,-
(ii) the day of the actual delivery of goods or the rendering of services; or
(iii) 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;
(iii) “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;
“Buyer”
Means whoever buys any goods or receives any services from a supplier for consideration.
“Enterprise”
Means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services.
“Goods”
Means every kind of movable property other than actionable claims and money;
3. Classification of enterprises
(a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951, as –
(i) a micro enterprise, where the investment in plant and machinery does not exceed twenty five lake rupees;
(ii) a small enterprise, where the investment in plant and machinery is more than twenty five lake rupees but does not exceed five crore rupees; or
(iii) a medium enterprise, where the investment in plant and machinery is more than five corer rupees but does not exceed ten corer rupees;
(b) in the case of the enterprises engaged in providing or rendering of services, as –
(i) a micro enterprise, where the investment in equipment does not exceed ten lake rupees;
(ii) a small enterprise, where the investment in equipment is more than ten lake rupees but does not exceed two corer rupees; or
(iii) a medium enterprise, where the investment in equipment is more than two corer rupees but does not exceed five corer rupees
Explanation 1 For the removal of doubt, it is hereby clarified that in calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.
Explanation 2 It is clarified that the provisions of section 29B of the Industries (Development and Regulation) Act, 1951, shall be applicable to the enterprises specified in sub-clauses (i) and (ii) of clause (a) of sub-section (l) of this section.
4. Consequences to Delayed Payments to Micro and Small Enterprises
(i) Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefore on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day: Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
(ii) Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.
(iii) For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16.
(iv) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.
5. Disclosure requirements
Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely:-
Under the heading “Equity and Liabilities”, in para (4), for “(b) Trade payable” the following shall be substituted, namely:—
“(b) Trade Payable:-
(a) total outstanding dues of micro enterprises and small enterprises; and
(b) total outstanding dues of creditors other than micro enterprises and small enterprises.”
Further following details relating to Micro, Small and Medium Enterprises shall be disclosed in the notes:
(i) the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year;
(ii) the amount of interest paid by the buyer in terms of section 18, along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year;
(iii) the amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act;
(iv) the amount of interest accrued and remaining unpaid at the end of each accounting year; and
(v) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of dis allowance as a deductible expenditure under section 23.
6. Requirement under Income Tax Act, 1961 and Rules made there under
Notwithstanding anything contained in the Income-tax Act, 1961, the amount of interest payable or paid by any buyer, under or in accordance with the provisions of this Act, shall not, for the purposes of computation of income under the Income-tax Act, 1961, be allowed as deduction.
Further Tax auditor of the enterprise also report that type of interest inadmissible under clause 22 of the form No. 3CA
Ref: 1) The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006
2) MCA Notification dated 04/09/2015
(Author can be reached at Cell- +91-7879084121, Email: camayankagarwal1006@gmail.com)
is it only restricted to Trade payable ? what about capital creditors which are disclosed under the schedule current liabilities ? there is no separate line item there. kindly clarify.