The government has taken significant measures for MSME (Micro, Small and Medium Enterprises), including measures to ensure they receive payments on time. As per a 2023 report by the Ministry of Corporate Affairs (MCA), over Rs. 10,000 crore payments to MSMEs were delayed beyond 45-day credit period provided by the government.

Thus, the MCA introduced the Form MSME-1 to track the delayed payments. Companies having outstanding dues to the MSMEs have to file the particulars of all current outstanding dues in Form MSME-1 with the ROC (Registrar of Companies).

What is Form MSME-1?

• Form MSME-1 must be filed by certain companies with the ROC to report the outstanding payments they have with MSME suppliers beyond 45 days. Companies need to identify if their suppliers are registered or not under the MSME Act, 2006. When the suppliers are registered under the MSME Act, and there are outstanding dues by a company to the MSME suppliers, it must file Form MSME-1.
• The MSME Development Act, 2006 (MSMED) strengthens the provisions relating to delayed payments to the MSMEs by providing the maximum credit period and penal interest for delay in payment. Section 15 of the MSMED Act states that where the suppliers render services or supply goods to any buyer, the buyers should make payment on or before the agreed date between them and the suppliers.
• When there is no agreed date for payment between the MSME supplier and buyer, the buyer must make payment before the appointed date. The appointed date means fifteen days from the date of acceptance. It also states that the period of credit granted by the seller should not exceed 45 days from the acceptance date or date of deemed acceptance.
• However, companies have to file this return only when they have payments outstanding for more than 45 days to the MSME supplier. The companies need not file a ‘Nil MSME-1 Return’ when there are no outstanding amounts with the MSME suppliers.

Who Should File Form MSME-1?

Specified companies should file Form MSME-1 when payments are due to MSME for more than 45 days from the date of acceptance of the services or goods, along with the reason for its delay. Specified companies are companies-

That have obtained goods or services from the MSME. Whose payments to the MSMEs exceed 45 days from the date of acceptance or deemed acceptance of the goods or services.

• That have obtained goods or services from the MSME.
• Whose payments to the MSMEs exceed 45 days from the date of acceptance or deemed acceptance of the goods or services.

Non-Compliance of Filing Form MSME-1

Non-compliance with filing MSME-1 by the specified companies will attract a penalty under Section 405(4) of the Companies Act, 2013. As per Section 405(4), if any company fails to file MSME-1, the company and every officer in default will be liable to a penalty of Rs.20,000. In case of continuing failure, the company and every officer in default will be liable for a further penalty of Rs.1,000 for each day the failure continues, subject to a maximum of Rs.3 lakh.