Analysis of Micro Small and Medium Development Act

Introduction

Act provides for facilitating the promotion and development as well as enhancing the competitiveness of Micro, Small and Medium enterprises.

Categorization of Micro, Small and Medium Enterprises

As per Act, The categorization of Micro, Small and Medium is based on investment in Plant and Machinery as below

For the purpose of computation of investment in plant and machinery, the cost of pollution control, R&D, Safety Devices etc. is excluded

Delayed Payments to MSME  

Payment shall be made by buyer to MSME for receipt of goods or service within the period agreed between buyer and supplier. The period shall not exceed 45 days from the date of acceptance of goods or rendering of services. If the payment is not made within due date buyer is liable to pay compound interest with monthly rests to supplier from the date of acceptance of goods or rendering of services or from the date immediately following agreed due date at three times of bank rate notified by RBI.

Disclosure in Notes to accounts

Where buyer is required to get accounts audited, the buyer shall furnish the additional information in notes to accounts as per below format  

Treatment of MSME Interest in Computation of Income as per Income Tax Act

Interest payable or paid under MSMED Act is disallowed for computation of income under income tax act.

Penalty

Non –furnishing of information demanded by Central or State Government officers related to MSME is liable for penalty. In case of first conviction liable for fine upto Rs. 1,000 and in case of subsequent conviction liable for fine which shall not be less than Rs. 1,000 but may extend up to Rs. 10,000.

Non-disclosure of details related to MSME in notes to accounts is punishable with fine up to Rs. 10,000.