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According to the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:
Manufacturing Enterprises: Manufacturing Enterprises are those enterprises which engaged in the manufacture or production of goods. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
As we are aware of the pandemic faced by the world because of the corona virus and the lockdown announced by the Prime Minister of the Country for precautionary measure it became difficult for the small and medium industries to survive because of lack of operations in the market. For helping the MSME’s to fight with this scenario the , Finance minister (Nirmala Sitaraman) of the country on 13th may 2020 revised the MSME limits.
The Finance minister stated that “Earlier, the criteria for manufacturing units and service units were different. Now those distinctions between Manufacturing and Service MSMEs has been removed. They will all be defined similarly,”
The revised definition of MSME is as follows:-
Micro units: MSMEs who falls under the categories mentioned here will be called Micro units if they have investments upto Rs 1 crore and turnover of less than Rs 5 crore.
The definition earlier was on investment criteria of up to Rs 10 lakh for Service MSMEs earlier and up to Rs 25 lakh for manufacturing.
Small units:For an MSME to be defined as a Small unit, the investment limit must be from Rs 5 crore to Rs 10 crore with a turnover of less than 50 crore.
This applies to all MSMEs including the Service enterprises which earlier came under investment of up to Rs 2 crore.
Medium units: Enterprises with investments up to Rs 20 crore and with a turnover of less than Rs 100 crore will now be called Medium units
Earlier, the investment limit for Medium units was up to Rs 10 crore and Service enterprises up to Rs 5 crore.
SUMMARY OF THE EARLIER AND REVISED LIMITS
Earlier the limits were:
| Classification | Micro | Small | Medium |
| Manufacturing enterprise | Investment up to Rs 25 lakhs | Investment of above Rs 25 lakhs and up to Rs 5 crore | Investment of above Rs 5 crore and up to Rs 10 crore |
| Servicing enterprise | Investment up to Rs 10 lakhs | Investment of above Rs 10 lakhs and up to Rs 2 crore | Investment of above Rs 2 crore and up to Rs 5 crore |
Revised limits announced:
| Classification | Micro | Small | Medium |
| Investment | Above 1 crore | Above 10 crore | Above 20 crore |
| Turnover | Above 5 crore | Above 50 crore | Above 100 crore |
MSME FORM-1
MSME FORM-1 is to be filed by the MSME’s who are covered under the definition mentioned above for the payment of half yearly return with the Registrar of Companies (ROC) in respect of the outstanding payments to Micro or Small Enterprises suppliers exceeding 45 days.
MSME FORM 1 half yearly return is required to be submitted to the Ministry of Corporate Affairs on a mandatory basis, by the all Companies who receive supply of goods or services from Micro or small enterprises and the amount of payment is outstanding exceeds 45 days from the date of acceptance or date of deemed acceptance of the goods or services with the reason of such delay.
The following particulars should state in it:
- amount of payment due
- and reasons for such delay
This from was introduced to protect the interest of Micro and Small enterprises from large companies.
Applicability on Companies
Companies specified as per the MCA guidelines are required to file the MSME form-1 The Specified Companies means the following Companies fulfilling the below two conditions:
- Condition 1: Company received Goods and/or Services from Micro or Small Enterprise
- Condition 2: Payment must have been due is remain unpaid, to such Micro and Small Enterprise for more than45 days from the date of acceptance or deemed to be acceptance
Date of deemed delivery refers to the acceptance of goods and services by the buyer in written with no objection with the product or services received within the 15 days period.
Exemption of filing the form
- The provision does not apply to all those company which do not satisfy the above conditions for the eligibility to fill form MSME-1;
- If the payment against supplier exceeds 45 days but the supplier/Creditors gave a declaration that they do not fell under the category of Micro or small Enterprises.
Due dates
Initial Return
MSME From-1 initial return’s due date was specified by government which was 30 days from when it was specified on the official website.
Half yearly Return
MSME form-1 half-yearly return has to be filed within 30 days from the end of each half-year by companies in respect of outstanding payments to Micro or Small Enterprise i.e. 30th April 2020 (for October 2019 to March 2020) and 31st October 2020 (April 2020 to September 2020).
Penalty for late filling form MSME-1
Section 405(4) includes non-furnishing/incomplete/incorrect information penalty states fine up to 25000 which may exceed to 3 lakhs and imprisonment of 6 months for directors or both. Therefore every company accepting goods or services from MSME shall be required to file the return , if payment is not made within 45 days.
