Introduction
MSME Form 1 is a compliance requirement form introduced by the Ministry of Corporate Affairs (MCA) in India. The purpose of this form is to collect information from specified companies regarding their payments to Micro, Small, and Medium Enterprises (MSMEs).Specified Companies are those companies which received good or services from MSME and haven’t paid for it for 45 days from the date of receiving the goods or services. This form aims to ensure that companies report any outstanding payments (dues) to MSMEs and adhere to the payment timelines stipulated under the MSME Development Act, 2006.MSME.
Purpose of MSME Form 1:
- Transparency: To promote transparency in the financial dealings between companies and MSMEs.
- Timely Payments: To ensure that MSMEs receive timely payments from the specified companies for the goods and services they provide
- Monitoring: To enable the government to monitor and address delays in payments to MSMEs.
Who should file?
If you are a company which receives goods and services from the MSMEs and pays them after 45 days of delivery or acceptance, you must fill in MSME form 1. They are known as specified companies.
When to file
MSME Form 1 should be submitted twice yearly. This means that submission is due within thirty (30) days at each half year end i.e., by 30th April and 31st October for each half year period ending on the 31st March and 30th September respectively.
- For the period from April to September (due by 30th October).
- For the period from October to March (due by 30th April).
1. Filing of MSME Form 1:
1.Prepare Necessary Information:
- CIN (Corporate Identification Number), PAN, and registered office address etc covering the company’s details.
- Details of the outstanding payments to MSMEs, including the name of the supplier, PAN of the supplier, the amount due, the date from which the amount is due, and the reasons for the delay in payment.
2. Log in to MCA Portal:
- Visit the MCA portal MCA Services.
- Use your credentials to log in.
3. Download the Form:
- Go to Forms & Downloads.
- Click on MSME Form 1.
4. Fill Out the Form:
The recommended software for opening this form (normally Adobe Reader) should be used.
Complete those fields
5. Attach any necessary documents that support what you have stated.
6. Pre-scrutiny Check:
All mandatory fields must be filled. Have a verification also
7. Submit the Form:
If all details have been entered and verified properly, then fill out the form online via the MCA portal. The applicable filing fees must then be paid if any exist
8. Acknowledgment:
Once you submit it successfully, you will receive an acknowledgment receipt. Keep this receipt as a useful reference piece.
Penalties:
If any Specified Company does not file the MSME Form 1
For the Company:
- The company may be liable to a fine which shall not be less than INR 25,000 but which may extend to INR 3,00,000.
This is for Directors and Officers in Default:
- For directors or officers of the company who are found in default, they shall be imprisoned for a term that may extend to six months or fined not less than INR 25,000 but may extend to INR 300,000 or both.
Documents to be provided:
- Invoices from MSME suppliers.
- Proof of payment or pending dues
Significance of this form:
- Legal Compliance:
Adhering to legal requirements and avoiding penalties.
- Supporting MSMEs:
Ensuring timely payments to enhance the financial health and sustainability of MSMEs.
- Corporate Responsibility:
Small businesses are supported by it as well as demonstrating the company’s commitment towards ethical business practices.
The MSME Form 1 and the MSME Development Act, 2006,
The MSME Form 1 and the MSME Development Act, 2006 are an unified effort to protect and promote the interests of Micro, Small and Medium Enterprises (MSMEs) in India. Here’s how they connect and what each entails:
MSME Development Act, 2006
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is a very broad legislation that basically encapsulates the intention, promotion, development and competitiveness of MSMEs within India. So here are the highlights of it: Classification of Enterprises:
- Micro Enterprises
- Small Enterprises
- Medium Enterprises
- Registration and Recognition:
- MSMEs can register under the Udyam Registration portal to avail of benefits.
- Credit and Finance:
- Facilitates timely and adequate credit flow to the MSME sector.
4. Delayed Payments:
Mandating that all payments to MSMEs be made within 45 days of the acceptance of goods or services. In case of delays,the interest shall be three times the bank rate notified by the Reserve Bank of India
5. Facilitation Council:-
To address the matters related to delayed payments, MSEFCs are set up.
6. Promotion and Development:
Advocates numerous plans for skill development, progress in technology and building better infrastructure.
Section-15 of MSMED Act,2006
Section 15 of the MSMED Act, 2006 deals with the issue of payments to Micro and Small Enterprises for the goods and services supplied by them. This Section is so vital because through this Act a legal framework has been created which ensures that all dues are cleared within the pre-decided timeframe thus ensuring that the financial interests of Micro and Small Enterprises are protected from wilful defaults from buyers.
Section 15: Buyer’s liability to Make Payment to the MSME
Key Provisions:Timely Payment Obligation:
The buyer is required to make payment to the MSME supplier on or before the agreed date.
Explanation of Key Terms:
1.Day of acceptance:
The day of acceptance means the day on which a buyer accepts the goods or services delivered by an MSME supplier.
The day it is termed as accepted, if no complaint is made within fifteen days.
2.Implied acceptance:
Deemed acceptance is when the buyer fails to communicate its agreement or disagreement with goods and services within fifteen days from their delivery date.
Importance of Section 15:
- MSME protection:
Aids in timely payment and cash flow which are critical for operations to be sustained in MSMEs.
- Legal remedies:
Provides legal grounds for small business owners to demand for their payments even after they have been delayed by those who owe them, thus protecting their rights also.
- Prevents Payment Delays:
Encourages buyers to honor agreed-upon payment timelines hence reducing situations where payments become overdue.
Penalty for not obeying:
Section 16 of the MSMED Act states that if any buyer does not pay off the amount due within the specified period, then he should pay compound interest at monthly rests referred as thrice the bank rate notified by RBI.
