Understanding Form MSME-1: Everything You Need to Know

The Ministry of Corporate Affairs (MCA) has made amendments under Schedule III of the Companies Act 2013 read with notification S.O. 368(E) dated 22nd January 2019 and introduced Companies (Furnishing of information about payment to micro or small enterprise suppliers) Order 2019 thereby introducing filing of Form MSME-1. Form MSME-1 is a half-yearly return that specified companies need to file regarding their outstanding payments to the MSME.

Objectives of Form MSME-1:

Under Form MSME -1, companies are required to make certain disclosures pertaining to the delayed payments of the vendors registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006). The main objective of this form is to inform ROC regarding outstanding payments by a company to its MSME registered vendors. This form helps in minimizing losses & promoting the overall growth of MSME sector.

Applicability of the Form MSME-1:

Form MSME 1 is required to be filed by specified companies, i.e :

1. all companies that get supplies of goods or services from micro or small enterprises AND

2. 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.

Note: This form is not applicable in case of medium enterprises

Filing Deadlines for Form MSME-1:

Key Details to Include in the Form MSME-1:

1. Corporate Identification Number (CIN) and PAN of the company.

2. The total outstanding amount for initial returns.

3. Supplier details: Names, PAN, and the due payment amount (applicable for both initial and half-yearly returns).

4. Specific reasons behind the payment delays.

If the number of entries exceeds 99, companies should file multiple forms.

Note: A total of 99 entries can be made in a single form. In case of entries more than 99, multiple forms can be filed.

Consequences for Non filing of Form MSME 1:

Non-filing of the Form MSME 1 will lead to punishment and penalty under the provisions of Section 405 (4) of the Companies Act, 2013 which provides that the company shall be punishable with a fine which may extend to twenty-five thousand rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to three lakh rupees or with both.

Conclusion: The introduction of Form MSME-1 underscores the government’s commitment to strengthening and safeguarding the MSME sector in India. By mandating timely disclosures of outstanding payments, the form aims to protect the interests of these businesses and ensure they remain vital cogs in India’s economic machinery.

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DISCLAIMER:- This Blog is for the purposes of information / knowledge and shall not be treated as a solicitation in any manner or for any other purposes whatsoever.

Feel free to contact the author for further clarification at 9953808432 or via mail at [email protected]. The author is the founder of SINGHANIA & ASSOCIATES (Practicing Company Secretaries Firm) based in Delhi.