Recently, Ministry of Corporate Affairs has introduced MSME FORM I pursuant to Order 2 & 3 dated 22 January, 2019 issued under Section 405 of the Companies Act, 2013 for furnishing Initial and Half Yearly return with the Registrar of Companies with respect to outstanding payments to Micro or Small enterprises. The intention of introducing the form seems to protect micro and small enterprises from financial loss due to nonpayment of their dues on time. Micro and small enterprises form a vital part of economy and generate employment which in turn improved the economy as a whole. It is an imitative on the part of Government to help Micro and small enterprises to recover their outstanding dues on time. Through this form, message is given to stakeholders to release the payment on time and it will act as an evidence for nonpayment of their dues.
Form MSME I introduced pursuant to Order 2 and 3 dated 22nd January, 2019 issued under Section 405 of the Companies Act, 2013 for furnishing Initial and Half yearly return with the Registrar of Companies with respect to outstanding payments to micro or small enterprises can be analyzed as under :
(1) First Initial Return for the period from 1st April, 2018 to 22nd January, 2019 (Date of Notification) and Regular Return for half year for the period 1st April to 30th September and 1st October, to 31st Form to be filed within 30 days of Publication of Notification in Official Gazette i.e. up to 30th May, 2019.
(2) Mention of CIN Number, PAN number of Company and Email Address of the company is mandatory.
(3) Details like Number of Entities, Name of Supplier, PAN of Supplier, Amount due, Specify the date from which amount is due and reasons for delay in payment of dues.
(4) Meaning and Object of Micro and Small Enterprises : The Main Objective of Micro Small Medium Enterprises Development Act, 2006( Act) is to facilitates the promotion, development and also enhances the competitiveness of micro, small and medium enterprises and for matters connected therewith and incidental thereto.
Various Benefits available to the enterprises registered under MSMED Act, 2006 are as follows :
a) Easy finance availability from Banks, without collateral requirements
b) Protection against delay in payment from Buyers and right of interest on delayed payment
c) Preference in procuring Government tenders,
d) Stamp duty and Octroi benefits,
e) Concession in electricity bills
f) Reservation policies to manufacturing / production sector enterprises
g) Time-bound resolution of disputes with Buyers through conciliation and arbitration
h) Reimbursement of ISO Certification Expenses
Chapter V of the ACT provides most important benefit which is available to the enterprises registered under the Act which is mentioned below
(i) The buyer has to make payment on or before the date agreed on between him and the supplier in writing or, in case of no agreement before the appointed day (Appointed date means the day following immediately after the expiry of a period of 15 days from the date of acceptance or the date of deemed acceptance of the goods and services).Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed 45 days from the date of acceptance or the day of deemed acceptance.
(ii) If, the buyer fails to make payment of the amount to the supplier, he shall be liable to pay interest at the rate as mentioned in the agreement entered or as per the law in force or be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.
(iii) In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government.
As per the provisions of the Act, every buyer is required to get his annual accounts prepared under any law in force and such buyer shall furnish the following additional information in his annual statement of account namely:
i. The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any seller as at the end of each accounting year.
ii. The amount of interest paid by the buyer as per the section 16, along with the amount of the payment made to the supplier beyond the appointed date 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 date 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.
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 disallowance as a deductible expenditure.
In short, if the payment has not been made to the Supplier registered under the MSMED Act, 2006:
1. The buyer has to disclose the total amount due to the supplier in his annual statement of accounts. If the buyer defaults in disclosing the said amount, then he shall be punishable with a fine which shall not be less than Rs. 10,000.
2. Further, the supplier can also opt for Micro and Small Enterprise Facilitation Councils to settle the disputed amount. Any reference of dispute to the council shall be settled within a period of 90 days from the date of making the reference.
We can Understand and define and categorize Micro, Small and Medium Enterprises as follows:
|S. No.||Type of Enterprise||Manufacturing Industry (Investment in Plant and Machinery)||Service Industry (Investment in Equipments)|
|1||Micro||Does not exceed Rs. 25 Lakh||Does not exceed Rs. 10 Lakh|
|2||Small||Exceeds Rs. 25 Lakh but does not exceed Rs. 5 Crore||Exceeds Rs. 10 Lakh but does notexceed Rs. 2 Crore|
|3||Medium||Exceeds Rs. 5 Crore but does not exceedRs. 10 Crore||Exceeds Rs. 2 Crore but does notexceed Rs. 5 Crore|
(5) Meaning of Specified Companies include Private and Public Limited Companies who received goods or services from MSME whose payment exceeds 45 days.
(6) The Day of Acceptance of Bill means
(a) The day of the actual delivery of goods or the rendering of services; or
(b) 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. And 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.
(7) The Companies which file MSME Forms should obtain status of their Suppliers to whom payment by the Company exceed 45 days including MSME Registration Certificate and category under which the supplier fall Viz. Small or Micro Enterprises along with copy of PAN Card. . For MSME1 Form purpose, Medium enterprises defined under MSME Act are not covered. The aforesaid company need to maintain a database of suppliers on regular basis so that compliance can be done easily. The Suppliers/Creditors include Companies of all kinds, Hindu Undivided Family, Partnership Firms and Proprietorship Firms. Limite d Liabilities Partnerships (LLP).
In some cases, Companies pay to micro or small enterprises within 45 days and which do not have such Micro or Small Enterprises for which MSME 1 Form need not be filed, the Professionals should obtain a declaration from such companies stating that the company do not have such small or micro Enterprise, format of declaration as under :
(ON LETTER HEAD OF COMPANY)
Date: 10th May 2019
The Registrar of Companies,
SUB: Non applicability of provisions section 9 of the Micro, Small and Medium Enterprises Development Act, 2006. (MSME 1 form).
This is to inform you that the Company do not have supplier of goods or services from micro and small enterprises and no 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 (27 of 2006), hence company is not filing MSME 1 Initial Return form with the Ministry of Corporate Affairs for period ending 22/01/2019 and also for the half year ending 31st March, 2019.
FOR AND ON BEHALF OF,
_________________________ PRIVATE LIMITED
Form MSME I is a simple Form to be uploaded by companies Firstly Initially and then half yearly. It is a small step by Ministry of Corporate Affairs towards protection of small and Medium enterprises and improve their competitiveness which is one of the Objective of MSME Act, 2006.
Disclaimer : The Views expressed in this Article are based upon prevailing facts and changes in Law to date and views expressed are purely personal in nature. Readers are advised to seek expert opinion before arriving at a decision.