Quick Answer
Form MSME 1 is a compliance tool introduced on 22 January 2019 under Section 405 of the Companies Act, 2013. It requires specified companies to report outstanding payments to Micro and Small Enterprises exceeding 45 days. Non-compliance can result in fines up to Rs 3 lakh or imprisonment up to 6 months.
MSME 1, ( eForm MSME Form 1) the new tool to crack on defaults to small companies The government has decided to crack down on companies delaying payments to small businesses by insisting that all defaulting entities mandatory provide it details of outstanding money with reasons by April or face action that could result in imprisonment up to 6 months or fine of not less than Rs 25,000 up to Rs 3 lakh.
The MSME form was introduced by the government on the Order dated 22 January 2019 issued under Section 405 of the Companies Act, 2013, to support the Micro and Small Enterprises in receiving their payments due from their beneficiaries, without any default. However, the form is not applicable to Medium Enterprises.
This form requires the specified companies (Companies which availed goods/services from the MSMEs) to state the details of payments which have been outstanding to the MSEs for more than 45 days from the date of acceptance.
A micro and small enterprise may include a HUF, an AOP, a co-operative society, a partnership firm or a public/private company. The classification of Micro or Small Enterprise depends upon their investment in Plant & Machinery in case of Manufacturing Sector or in Equipment in the case of Service sector.
| MICRO | SMALL | |
| Manufacturing Enterprises | Rs 2,500,000 | Less than Rs 50,000,000 |
| Service Enterprises | Less than Rs 10,00,000 | Less than Rs 20,000,000 |
The specified companies have to inspect if his supplier falls under the MSE and is registered. If so, then the particulars of the liability needs to be filled which shall include:
The filing of the returns comprises of two parts, for initial returns and half yearly returns.
The initial return form needs to be filed as a one-time return, and the due date for which is 30 days from the date of form made available by the MCA, which make the current due date as 31st of May, 2019.
The half yearly return needs to be filed in regular half year intervals by the companies for which the due date is 30 days from the end of half year, which are 30th April and 31st October.
In case of default to comply with the provisions above, the penal fee will be applicable as follows:
For companies – A maximum of Rs. 25,000
For the office in default (Director/CEO/CS) – Rs. 25,000 to Rs. 30,000 or imprisonment up to 6months or both
Conclusion
Given the strictness of the government, The tightening of the noose around the companies comes after a major crackdown by the government on directors and shell companies through DIR 3 KYC and INC 22A, this is a good move considering the interest of MSME segment has been ignored and large companies delay the payment without any reason, this would benefit all MSME registered in India,
Call it an election gimmick or real transformation, this step was necessary to protect the small and marginal MSME entrepreneurs
The eForm MSME 1 was introduced by the government on 22 January 2019 to crack down on companies that delay payments to small businesses. It ensures that specified companies disclose outstanding dues to Micro and Small Enterprises, helping these small entrepreneurs receive payments due to them without default.
Specified companies that have availed goods or services from Micro and Small Enterprises must file this form. It applies to companies with outstanding payments to these entities that exceed 45 days from the date of acceptance, although the form does not apply to Medium Enterprises.
The initial return, a one-time filing, had a due date of 31 May 2019. Subsequent half-yearly returns must be filed within 30 days from the end of the half-year period, specifically by 30 April and 31 October of each year for the preceding half-year intervals.
Companies must provide the total amount due to Micro and Small Enterprises as of 22 January 2019. Additionally, the form requires the supplier's name and PAN, the dates on which payments became due, and the specific reasons for any delays in settling these outstanding liabilities.
Failure to comply leads to penalties for the company of up to Rs 25,000. For an officer in default, such as a Director, CEO, or CS, the penalty is a fine ranging from Rs 25,000 to Rs 3 lakh, imprisonment for up to 6 months, or both.