MSME Form-1 Filing: Do You Really Need to Report Payments Made Within Made Within 45 Days?
Introduction
The Ministry of Corporate Affairs (MCA) introduced Form MSME-1 on 22nd January 2019 to enhance compliance and accountability, requiring companies to report outstanding dues to Micro and Small Enterprises (MSEs) if payments are delayed beyond 45 days.
Recent updates, especially the 15th July 2024 MCA Notification and the shift to the V3 Portal, have expanded the disclosure requirements. The revised MSME-1 form now includes a separate table for payments made within 45 days, reflecting the Ministry’s intent to capture a complete picture of companies’ payment practices towards MSEs.
Let’s examine the legal framework, interpretational ambiguities, and the resulting confusion from these broadened disclosure requirements.
Applicable Legal Provision:
- Section 405 of the Companies Act, 2013
- MSME Notification – 22nd January 2019
While the MSME-1 Order, 2019, read with Section 405 of the Companies Act, 2013, clearly mandates reporting only of “amounts due for more than 45 days” to Micro and Small Enterprises, the revised e-Form MSME-1 (V3) now requires companies to disclose even payments made within 45 days.
This raises a legitimate compliance question:
“If the law only mandates reporting of delayed payments beyond 45 days, why does the form seek information for payments made within the 45 days or do we require to file form MSME 1 for payment made within 45 days”
The notification dated 22nd January 2019 mandates filing MSME Form-1 only when payments to MSMEs exceed 45 days. However, the expanded disclosure in the revised form appears to stem more from policy intent (transparency and data collection) rather than a formal amendment to the original legal requirement.
From a legal perspective, the filing requirement is triggered only when any payment to an MSME exceeds 45 days. Once this threshold is breached, the company is obligated to report all payments to that MSME vendor, including those made within 45 days. This aligns with the principle of literal interpretation—the law must be followed as written, without reading into it what is not explicitly stated.
For example:
- A is a registered MSME vendor supplying goods to X Ltd., with 10 invoices issued. If even 1 invoice is unpaid for more than 45 days, then all 10 invoices (including timely paid ones) must be disclosed in Form MSME-1.
- If all 10 invoices are paid within 45 days, there is no obligation to file MSME-1, since the law applies only when any payment is overdue beyond the 45-day period.
Conclusion
Applying the golden rule of interpretation, Form MSME-1 filing is mandatory only when at least one payment exceeds 45 days. In such cases, all invoices—irrespective of the payment period—must be reported in the form. If no payment breaches the 45-day limit, filing is not required.
This ensures that the compliance obligation is rooted strictly in payment delays, consistent with the original intent of the 2019 notification, and not based on expanded data fields in the V3 form.
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Akash V & Associates | Email: Compliance.ava@outlook.com | Mobile: +91 7503166453 / +91 9389525075
Author Bio
Central Govt amended the previous order and brought Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Amendment Order, 2024 on 15th July 2024.
The New order now requires following:
1. Paid after 45 days
2. Dues for less than 45 Days
3. Dues for more than 45 days
Kindly read the Order.
The Specified Companies (Furnishing of Information about Payment to Micro and Small Enterprise Suppliers) Amendment Order, 2024 inserted the following proviso:
“Provided that only those specified companies which have payments pending to any micro or small enterprises for more than 45 days from the date of acceptance or the date of deemed acceptance of the goods or services under Section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), shall be required to furnish the information in MSME Form-1.”
This requirement continues to remain in force and is applicable only to “Specified Companies.”
A “Specified Company” refers to a company that procures goods or services from Micro or Small Enterprises and has payments due to such enterprises outstanding for a period exceeding 45 days from the date of acceptance or deemed acceptance of such goods or services.
The communication issued in 2024 provides an option for specified companies to disclose payments due for less than 45 days. However, it is important to note that this disclosure is not mandatory for all companies whose payments are less than 45 days outstanding. Only specified companies with overdue payments beyond 45 days are mandated to file MSME Form-1.
Payments within 45 days must be mentioned only by Specified Companies.