MCA Enforces Enhanced Disclosures On Dues Pending To MSMEs

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The Ministry of Corporate Affairs (MCA), vide notification dated 15 July 2024, has amended the Specified Companies (Furnishing of information about payment to Micro and Small Enterprise suppliers) Order, 2019...
India Corporate/Commercial Law
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The Ministry of Corporate Affairs (MCA), vide notification dated 15 July 2024, has amended the Specified Companies (Furnishing of information about payment to Micro and Small Enterprise suppliers) Order, 2019 (the Order) by adding a proviso. The proviso clarifies that only "Specified Companies" that have outstanding payments to any Micro or Small Enterprise supplier for more than 45 days from the date of acceptance or deemed acceptance of goods or services under Section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (the MSME Act) are required to furnish information in the prescribed form (previously MSME-1). The Order also mandates the use of a new form, replacing the existing MSME-1 for such filings.

Extract of the proviso inserted

"Provided that only those specified Companies which are having 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 furnish the information in MSME Form-1."

The following new information is required in MSME Form-1, namely:

  • Amount paid within 45 days:
    • Through TReDS;
    • Other modes of payment;
  • Amount paid after 45 days;
  • Amount outstanding for 45 days or less;
  • Amount Outstanding for more than 45 days;
  • Reason for delay in payment/amount outstanding.

Our Comments

As per the new reporting requirements, companies are required to file this return even for the payments made within 45 days, which was not required earlier. This means irrespective of whether amounts are outstanding as on specified dates, i.e., 31 March or 30 September or not; if payments were made after 45 days during a half-year reporting period, MSME Form-1 shall be filed.

While MCA has requested additional compliance reporting in this amendment, it is anticipated that the government will also start reporting these to the MCA portal if any company delays the payments to MSME and may attract penalties/repercussions. The move may seem like a burden to companies to start with, but MSME may welcome it once the effective utilization of this information is implemented to ensure stricter measures and tighter control on defaulting MSME payments. There are 47.27 MSMEs (Udyam) registered (including Udyam Assist Platform) with the Udyam Portal, of which 46.43 million are Micro, 0.7 million are Small and 67,000 are Medium Enterprises. While the new amendment may seem like additional reporting to Medium to Large Enterprises, this move is likely to be welcomed by Micro and Small companies, which often struggle to receive payments from Medium to Large Enterprises in a timely manner.

The official notice can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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