MSME Form 1 is a form that must be completed by “Specified Companies” that receive supplies from Micro, Small, and Medium Enterprises in the form of goods or services. It is filed twice a year, implying that it is a semi-annual return. Furthermore, this form must be filed, and failure to do so may result in legal action being taken against such businesses. Let’s take a closer look at this e-form in this blog.
|
Table of Contents |
What is MSME-1?
The MSME I Form is used to give information to the Registrar of Companies on a half-yearly basis regarding outstanding payments to Micro or Small Enterprises for a period of more than 45 days (ROC). The Ministry of Corporate Affairs has taken significant changes to protect the interests of small groups of enterprises or businesses. It emphasized the importance of all Specified Companies, whether public or private, micro or small, according to the rules.
All companies that receive supplies of goods or services from micro or small enterprises and make payments to these micro and small enterprise suppliers for more than 45 days from the date of acceptance (or deemed acceptance) of the relevant good or services are necessary to submit a half-yearly return to the Ministry of Corporate Affairs on a mandatory basis. It should include the amount due and the reasons for the late payment
Further, The Central Government makes it mandatory for all “Specified Companies” to provide the above-mentioned information about payments to micro and small firm suppliers under section 405 of the Companies Act, 2013, (18 of 2013).
Role of MSME in the Economy
In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, the Indian government has launched MSME, or Micro, Small, and Medium Enterprises. These businesses specialize in the manufacture, manufacturing, processing, or storage of goods and commodities. Furthermore, MSMEs in India account for around 8% of the country’s GDP, 45 percent of manufacturing output, and over 40% of exports. Likewise, they might refer to it as the ‘Backbone of the Country.’
MSMEs are a vital part of the Indian economy and also made significant contributions to the country’s socio-economic growth. It not only creates job possibilities but also contributes to the development of the country’s backward and rural areas. According to the government’s annual report (2018-19), India has roughly 6.3crore MSMEs.
Penalty for Non-Filing/Delayed filing of MSME as per Section 450
Companies that violate Sections 405 (1) and (3) of the Companies Act, 2013 are subject to the penalties outlined in Section 405 (4) of this Act. If a company fails to file MSME-1 within 30 days or knowingly furnishes any information or statistics that are incorrect or incomplete in any material respect, the company may fine up to twenty-five thousand rupees, and any officer of the company who is in default may sentence to six months in prison or a fine of not less than twenty-five thousand rupees but not more than twenty-five thousand rupees.
| Entities | Penalty Fees |
| For Companies | Fine up to INR 25,000 |
| Defaulting Officers of the Company | Fine of Rs. 25, 000, which can be increased to Rs. 3, 00,000, or imprisonment for up to six months, or both. |
Impact of Non-filing/delayed filing of MSME On Company
By utilizing the power of the Central Government, the MSME-1 form was initiated under the Companies Act, 2016 u/s 405 by using the power of the Central Government. However, Section 405 of the Companies Act of 2013 does not contain any penalties or fines. Furthermore, under the Companies Act, there is a Section 450 that stipulates that if no penalty is provided for any section/rule, the penalty will impose as per Section 450.
- Penalty On Company: A penalty of ten thousand rupees, with an additional penalty of one thousand rupees for each day after the first during which the infringement persists, up to a maximum of two lakh rupees in the event of a firm.
- Penalty of Director: Fine of more than twenty five thousand rupees or equal to twenty five thousand rupees. However, can also sentence for six months in prison, or both.
Notice of Adjudication by ROC
If a company files MSME-1 after the deadline or fails to file MSME-1 form, it is subject to a penalty under Section 450 of the Companies Act, 2013. Also, according to Section 454, the ROC has the authority to issue a notice of adjudication to the Company. In the event of an adjudication notice, the ROC is unable to lower the penalty sum below the minimum penalty amount.
Submission Deadline of MSME Form 1 (MCA)
- Initial Filing: The MSME form 1 deadline is up to May 30, 2020, for all qualifying enterprises. Corporations will have 30 days to complete the document, according to the government.
- Half-yearly Returns: Every company must file the MSME Form I as a half-yearly return by October 31st, effective for the months of April to September, and again by April 30th, effective for the months of October to March each year, referring to outstanding payments to MSMEs.
Conclusion
The micro, small, and medium-sized enterprise (MSME) sector has played a vital part in the growth of the country. It also gave banks more choices for lending to medium and small-sized businesses. Furthermore, to avoid penalties under Section 450 of the Companies Act, timely filing of MSME forms is essential. In addition, the government should place a premium on the importance of MSME. Likewise, for the sector’s long-term viability, the government should provide more and more MSME benefits by establishing improved guidelines to provide loans at reduced interest rates.
