Complete Guidance on Form MSME And Analysis on Section 43B(h) of Income Tax Act, 1961
Introduction
Gain complete guidance on Form MSME-1 filing for companies dealing with micro and small enterprises. Understand the criteria, timelines, and details required, ensuring compliance and avoiding penalties. No filing fee, and attachments are necessary. Stay informed and meet the MSME-1 filing requirements hassle-free.
As we all are aware that all the Companies are required to file two MSME-1 forms with the concerned authority i.e. Registrar of Companies.
Now, we understand which Companies are required to mandatorily file their Form MSME-1.
All companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty-five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter referred to as “Specified Companies”), shall submit a half yearly return.
AMENDMENT
√ The Finance Act of 2023 came with amendment to Section 43B by adding a new clause and this amendment became effective from FY 2023-24.
√ It covers only Micro and Small enterprise.
Definitions of Micro, Small & Medium Enterprises
> In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) were earlier classified into two classes-
An enterprise shall be classified as a micro, small or medium enterprise on the basis of the following criteria, namely:–
- A Micro Enterprises- Investment in plant and machinery or equipment does not exceed 1 Crore AND Turnover does not exceed five Crore rupees.
- A Small Enterprises- Investment in plant and machinery or equipment does not exceed 10 Crore AND Turnover does not exceed fifty Crore rupees.
- A Medium Enterprises- Investment in plant and machinery or equipment does not exceed 50 Crore AND Turnover does not exceed two hundred fifty Crore rupees.
The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, are as under:
| Classification | Investment Limit | Turnover |
| Micro | Less Than INR 1 Crore | Less Than INR 5 Crore |
| Small | Less Than INR 10 Crore | Less Than INR 50 Crore |
| Medium | Less Than INR 50 Crore | Less Than INR 250 Crore |
The term “AND” is used between the two conditions. Therefore, an enterprise should satisfy both the conditions to qualify to a Micro, Small or Medium enterprise as the case may be.
EXAMPLE
- Purchase done on 1st February, 2024, due date of payment will be 17th March, 2024, but not paid on time or even before end of 31st March, 2024.
> In this case you can’t claim deduction of purchase in F.Y. 2023-24 (disallowed & have to pay tax).
Profit – 5 Lakh
Add – Purchase
TIME LIMIT 15 OR 45 DAYS
> If have Agreement- 45 Days
> If don’t have Agreement- 15 Days
| S. No. | Bill No. | Due Date | Actual Payment Date | Deduction allowed in which FY |
| 01. | 01-02-2024 | 17-03-2024 | 28-03-2024 | 2023-24 |
| 02. | 01-02-2024 | 17-03-2024 | 15-05-2024 | 2024-25 |
| 03. | 20-02-2024 | 05-04-2024 | 02-04-2024 | 2023-24 |
| 04. | 20-02-2024 | 05-04-2024 | 10-04-2024 | 2024-25 |
APPLICABILITY/NON-APPLICABILITY OF SECTION 43B(H)
| APPLICABLE | NOT APPLICABLE |
| Only those business which prepare Books of Accounts & file ITR-3 or having Tax Audit. | Taxpayer which opt presumptive taxation (ITR-4) |
| Manufacturer or Service Provider | Trader(even if they are registered with UDYAM) |
| Micro & Small Enterprise | Medium Enterprise |
PAYMENT TERMS FOR MSME
√ If payment is not done within 45 days then your purchase (Creditor) treated as Income & have to pay extra taxes.
√ It is applicable from 1st April, 2023.
Timeline of filing of Form MSME-1
a) For the period October to March- 30th April (Due Date)
b) For the period April to September- 31st October (Due Date)
Criteria for MSME
Details Required for filing the Return in the form MSME FORM I:
(a) Total outstanding amount due from April to September or October to March as the case may be
(b) Particulars of the name of suppliers and amount of payments due
- Financial Years/Particulars
- Name of Suppliers
- PAN of Suppliers
- Amount Due
- Specify the date from which amount is due
(c) Reasons for Delay in amount of payments due
Fees for filing of Form MSME-1
There is no such fee for filing of form MSME-1 and also there is no additional fee after due date for filing of form MSME-1.
Attachments for Form MSME-1
There is no such mandatory attachment for form MSME-1.
Non-Compliance of filing of Form MSME-1
Penalty: The company and every officer in default will be liable to a penalty of Rs. 20,000. In case of continuing failure, the company and every officer in default will be liable for a further penalty of Rs. 1,000 for each day the failure continues, subject to a maximum of Rs. 3 Lakh.
Conclusion:
The assessee needs to check dues to MSME as on 31st March. If the due dates as per section 15 of MSMED Act has been expired then the assessee cannot take deduction of expenditure and if the due dates are not expired on 31st march then assessee needs to make payment before expiry of due dates to claim such expenditure in current financial year.
It is beneficial for the assessee to evaluate outstanding dues to Micro and Small enterprise before the year end. If the assessee has not paid to MSME within due date but before the year end then also he can take deduction of expenditure in current year. This will help to claim such expenditure in the current financial year.
It is advisable to Put Udyam number and due date as per MSME in the invoice of assessee.
(This article represents the views of author only and does not intend to give any kind of legal opinion on any matter.)
Published by: CS Neha Bisht | Practicing Company Secretary
(Republished with amendments)
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