Transactions to be mentioned in E-form MSME-1 as per MCA

On January 22, 2019, the Ministry of Corporate Affairs (MCA) issued a notification requiring certain corporations with outstanding dues to MSME enterprises to file Form MSME-1, including the ROC detailing all current outstanding dues (Registrar of Companies). Although many of you wonder and have various queries regarding ‘What Transactions to be mentioned in E-form MSME-1?’ Since its inception, there have been many misunderstandings about this form, here in this blog we will now discuss in detail MSME and transactions which should mention in the same.

What is MSME Form-1?

On a half-yearly basis, the MSME I Form is to provide information to the Registrar of Companies. It includes information about outstanding payments to Micro or Small Enterprises for a period of more than 45 days (ROC). Also, to defend the interests of small groups of enterprises, the Ministry of Corporate Affairs has made substantial modifications. It stressed the necessity of all Specified Companies adhering to the rules, whether public or private, tiny or small.

All companies that receive supplies of goods or services from small businesses and make payments to these business suppliers for more than 45 days from the date of acceptance, necessary to file a half-yearly return with the MCA. The amount due as well as the grounds for the late payment should include.

Furthermore, under section 405 of the Companies Act, 2013, the Central Government has made it essential for all “Specified Companies” to report the above-mentioned information about payments to micro and small firm suppliers.

Analysis of the Ministry of Corporate Affairs’ notice and MSME Act, 2006

• According to the circular, if a corporation delays payment to a micro, small business for more than 45 days, the company must report the transaction on the MSME-1 form.
• As per Sections 15 & 16 of the MSME Act, 2006, a buyer of products or services who pays an MSME vendor after 45 days is liable to pay compound interest. Also, he needs to pay a monthly rest to the provider.

Items to be mention in MSME form 1

• The company’s CIN and PAN
• The company’s name, address, and e-mail
• Suppliers’ names and PANs
• Amount owed for the supply of goods or services that has not paid.
• The due date is the date on which the money is due.
• The reason for the late payment of the required due amount.

If a company registers with MSME, Is it necessary for such a corporation to file the MSME-1 form?

To determine the MSME-1’s applicability, the company must examine the following criteria:

• The company must work with an MSME vendor.
• The company must have been 45 days late in paying the MSME vendor.

In both of the following criteria, the company must file an MSME-1 form with the ROC. Whether or not a company is MSME-registered has no bearing on the need to file MSME-1.

If, payment to the MSME vendor is not made within 45 days and is still overdue at the end of the half-year. Is it necessary to include such a transaction in the MSME-1 form?

According to a combined interpretation of the MCA’s notification and the MSME Act of 2006, the answer to the question is:

• Under Section 15 of the MSME Act, companies must pay MSME registered vendors within 45 days of receiving goods or services.
• According to Section 16 of the MSME Act, if a company fails to pay an MSME registered vendor within 45 days, the company must pay the vendor plus interest.
• Companies that receive supplies of products or services from MSME and whose payments are late for more than 45 days must submit MSME-1 with the Registrar of Companies, according to MCA notification.
• As a result, all these payments should note on the MSME-1 form.

If payment is made to an MSME vendor after 45 days but before the end of the half-year, the payment will be considered late. Is it necessary to record such a transaction on the MSME-1?

Payments to the MSME vendor have already been made before the end of the half-year, as required. As a result, no payments are due at the end of the half-year. However, payments made after 45 days are significant. The purpose of the MCA in respect to the MSME Act of 2006 is to safeguard MSME register sellers. Also, to ensure that they receive payment for their supplies/services within 45 days.

If a company does to pay within 45 days, it is necessary to pay interest to the vendor under Section 16 of the MSME Act, 2006.

Also, as stated in the MCA notification- 

“All companies, who get supplies of goods or services from micro and small enterprises and WHO’S PAYMENTS to micro and small enterprise suppliers, EXCEED forty-five days from the date of acceptance”

It is clear to conclude that all these payments that were late by more than 45 days must list on the MSME-1 form.

Final Words

In contrast to the previously mentioned details, it is now apparent which transactions should mention in MSME-1.

All payments made during the half-year to MSME vendors after the 45-day period have expired.

All payments to MSME vendors those are late for more than 45 days throughout the half-year, i.e. September 30, 2021.