On January 22, 2019, the Ministry of Corporate Affairs (MCA) issued a notice requiring all companies to report their outstanding dues with MSMEs (Micro, Small, and Medium Enterprises) by filing MSME form 1 through the Registrar of Companies (ROC).
Companies need to identify whether their suppliers are registered under MSME. If they are, and if there have been outstanding dues for more than 45 days, the company must file the MSME 1 form starting from the date of acceptance of goods or services. The form must be filed every six months through the ROC, and Non-compliance will lead to penalties.
Also Read:- 45-Day MSME Payment Rule – Section 43B(h) for MSMEs
In this blog post, we will explore the purpose of MSME Form 1, the process of filing it, the MSME return requirements, the penalties for non-compliance, and more. Let’s dive in!
Why MSME Form 1 is Important ?
Filing MSME Form – 1 is quite important for businesses dealing with micro and small enterprises to disclose the details of outstanding payments, which promotes transparency and supports timely payment to MSMEs.
You must comply with the requirements of the Ministry of Corporate Affairs (MCA). Doing this helps the government to monitor and address the payment delays, ensuring MSMEz receives their due payments on time or within 45 days of the purchase. Non-compliance to MSME Form -1 can lead to penalties.
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Purpose of MSME Form 1
The MSME Development Act, 2006 (MSMED) strengthens the provisions relating to dues owed to MSMEs by providing sufficient credit time and applying penalties for any further delay in payment.
Under Section 15 of the MSMED Act, companies are required to pay the due amount by the agreed-upon date once the goods or services have been received. In case there is no agreement between the parties, payment must be made within 15 days from the acceptance of goods or services.
To reinforce this provision, the MCA introduced the MSME-1 form, which a company or business must file if payment for goods or services received from an MSME is delayed for more than 45 days. MSME Form 1 is a half-yearly return that companies are required to file if they have any outstanding payments to MSMEs. This allows the ROC to track companies with overdue payments to MSMEs and monitor MSME suppliers who are awaiting payments.
Documents Required for MSME Form 1 Filing
Companies must report the following details:
- CIN and PAN number of the company
- Name, address, and e-mail of the company
- Name and PAN of the suppliers
- Outstanding amount due for the supply of goods or services
- Date from which the amount has been due
- The reason why the payment is delayed
Also Read:- GST Return – What Is GST Return? Who Should File, Due Dates & Types of GST Returns?
Procedure For Filing Of MSME Return
Take a look at this MSME return filing procedure:
Step 1: Download E-Form:
First, download an e form msme 1 from the Ministry of Corporate Affairs (MCA) portal. Then, choose whether you are filing the form for an initial MSME or a half-yearly MSME return.
Step 2: Fill CIN:
Now, enter your company’s CIN ( What is CIN Number?) and click the Prefill button. As a company, you also need to enter the company’s global location number and PAN card number.
Step 3: Enter Basic Details:
Once entered the company details, the applicant must enter their basic details, which are:
- Name of the Company
- Address of the Registered Office and
- E-mail address and other contact details of the Company
Also Read:- 7 Type of Company Registration In India
Step 4: Details for Initial Return:
Enter the details that reflect the due amount to MSMEs, which are as mentioned below:
- The total outstanding amount as of the notification date
- Details of the financial year
- The names of the suppliers
- Supplier’s PAN Card details
- The specific date from which the amount has been overdue
Step 5: Details for Half-Yearly Return:
If you are filing a half-yearly return, which is also known as a “Regular Return,” the candidate is required to enter the requisite details for this part as follows:
Amount that is Pending From April to September and October to March
- Financial Year Details (“From” & “To”),
- Name of Suppliers,
- Suppliers’ PAN Card details,
- The outstanding amount,
- Particular date from when the payment is outstanding.
Step 6: Change Any Incorrect Information:
Click on the Prefill button, and all your company details will be fetched automatically. However, you can make changes to these details if needed.
Step 7: Enter the Due Payment Amount:
Finally, enter the amount that is to be paid to the micro or medium enterprises and then submit the form.
Last Date for Filing MSME Form 1
Here are the due dates to file the MSME-1 form:
| Due Date | Period for which the MSME-1 form is filed |
| 30th April | For October-March period |
| 31st October | For April-September period |
Consequences of Non-Compliance with MSME-1 Form
The non-compliance of MSME return filing by the specified companies with pending dues will result in a penalty under Section 405(4) of the Companies Act, 2013. As per Section 405(4), any company that fails to file MSME-1, the company, and each officer in default will be liable for a penalty of Rs. 20,000.
If the company still fails to make the payment, each officer in default will be liable for an additional penalty of ₹1,000 for each day the failure continues, up to a maximum of ₹3 lakh.
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Summary
If your company deals with MSME and has pending payments overdue for 45 days or more, it is essential to file Form MSME-1 in compliance with the MSME Development Act, 2006 (MSMED) to avoid penalties. Failure to file this form can result in significant financial penalties under Section 405(4) of the Companies Act 2013.
If there are no pending dues, you can file a Nil MSME return, though it is not mandatory. Before finalizing the submission to the Registrar of Companies (RTO), ensure that the form is duly signed by the company’s management or authorized officials. This step is crucial for ensuring the form’s validity and compliance with regulatory requirements.
FAQs
- Is MSME Form 1 applicable to LLP?
No, MSME Form 1 does not apply to LLPs; it only applies to MSME suppliers or simply midsize or small businesses.
- What are the two classes of MSME?
MSMEs are divided into two categories depending on whether the company is manufacturing/product-based or service-based. Manufacturing enterprises are essentially engaged in the production or manufacture of goods or products.
Meanwhile, service enterprises focus on providing services rather than goods or products. Both categories are classified based on the investment and equipment used.
Also read:- 12 Profitable Manufacturing Business Ideas In India
- What is the MSME-1 circular?
The MSME-1 circular is a half-yearly report that companies in India must submit to the Ministry of Corporate Affairs (MCA). This report details any outstanding payments they owe to Micro and Small Enterprises (MSMEs).
- What is the MSME 1 amendment?
The amendment to MSME-1, enacted under Section 405 of the Companies Act 2013, introduces a small change in the form’s filing requirements. As per the revised order, companies are now required to report comprehensive details regarding payments pending to MSMEs.
- What are the changes in MSME-1?
Recent changes to MSME-1 include a longer deadline for filing, updated payment thresholds, and more detailed reporting requirements. Companies may face stricter penalties for not filing on time, and the online filing process has been improved for easier use.
- Who Cannot Apply for MSME?
Large enterprises that exceed the size limits, companies that only trade or provide services without manufacturing, and those in specific excluded industries are not eligible to apply for MSME. Additionally, businesses that have defaulted on loans or are currently in liquidation or bankruptcy cannot apply.