On May 1st, 2019, the Ministry of Corporate Affairs ("MCA") released e-form MSME 1 ("MSME 1"), requiring all companies obtaining supplies of goods/ services from micro and small enterprises ("Enterprises") and whose respective payments to such Enterprises exceed forty-five days from the date of acceptance or the date of deemed acceptance of such goods/ services to file MSME 1, by 30th May, 2019.
The release of e-form MSME 1 by the MCA was a result of MCA's earlier order -Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order 2019 ("Order ") dated 22nd of January 2019. The Order stated that, all companies who get supplies of goods/services from Enterprises and whose respective payments to such Enterprises exceed forty- five days from the date of acceptance or the date of deemed acceptance of such goods/ services (hereinafter referred to as "Specified Companies"), are required to submit a half yearly return to the MCA stating the amount of payment due and the reasons for the delay. The Order required all Specified Companies to furnish details of all such outstanding dues by filing MSME 1.
Small, Micro and Medium Enterprises
Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 defines the micro, small and medium enterprises as follows:
| Manufacturing Sector | Service Sector | ||
| Enterprises | Investment in Plant & Machinery | Enterprises | Investment in Equipment |
| Micro Enterprises | Does not exceed Rs. 25
Lakhs. |
Micro Enterprises | Does not exceed Rs. 10 Lakhs. |
| Small Enterprises | More than Rs. 25 Lakhs
but does not exceed Rs. 5 Crores. |
Small Enterprises | More than Rs. 10 Lakhs but does not exceed Rs. 2 Crores. |
| Medium Enterprise | More than Rs. 5 Crores but does not exceed Rs. 10 Crores. | Medium Enterprise | More than Rs. 2 Crores but does not exceed Rs. 5 Crores. |
The term enterprises cover companies, partnership firm, Association of Person, Hindu Undivided Family, co-operative society, proprietorship firm etc.
It is to be noted that MSME FORM 1 is not applicable in the case of outstanding sums due to medium enterprises.
Procedure for Filing MSME 1
MSME 1 requires Specified Companies to provide details such as the total amount that is outstanding on the date of the MSME 1 being deployed, details about the Specified Company (name, address, PAN and CIN), particulars of the supplier of the Enterprise (name, PAN), the date from which the amount is due and reasons for the delay in payment.
Subsequent to the notification of the Order, the MCA clarified that the due date for filing MSME 1 for the first time shall be thirty days from the date the of the deployment of the MSME 1 on the MCA portal. As mentioned, MSME 1 has been released on the MCA portal as on 1st May 2019.
Following the first filing of MSME 1, every Specified Company is required to file MSME 1 twice a year on or before the prescribed "due-date" which is as under:
- For the period April – September: 31st October;
- For the period October – March: 30th April.
Penalty
A failure to comply with the Order, shall attract a fine which is extendable to twenty-five thousand rupees. Further, any officer in default of the Specified Company shall be punishable with imprisonment which can extend to a period of six months or fine which can extend to three lakhs rupees, but not less than twenty-five thousand rupees or both.
Conclusion
The introduction of MSME-1 is another initiative by the present government to strengthen the micro and small enterprises by prescribing a mandatory filing regime twice a year by their large customers. This will enable speedier recoveries of the dues of the SMEs from large corporate clients. Moving forward, such large corporate clients of SMEs will first need to determine whether their suppliers are registered under the Micro, Small and Medium Enterprises Development Act, 2006. If they have been, and if payments to them are due for more than forty-five days from the date of acceptance of the goods or services, the Enterprise would be compulsorily required to file MSME 1.
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