Change in form MSME-1 – Exhaustive disclosure framework!
July 17, 2024
Change in form MSME-1 – Exhaustive disclosure framework! - MMJC
Introduction:
In its constant end ever to bring ease of doing business, the Ministry of Corporate Affairs (MCA) has been in the process of shifting all the e-forms from V2 version of MCA portal to V3 version of the Portal wherein all the forms are in the format of web based forms. MCA has already shifted forms relating to deposits, charges and various other filings companies and all LLP related filings to V3 portal. Now MCA with effect from 15th July 2024, has shifted 9 more forms namely, FormMGT-6, Form BEN-2, Form MSME-1 & IEPF related forms to V3 portal. In this brief article, we shall try to understand the changes that have taken place in form Form MSME-1 in the process of shifting from V2 to V3 portal.
Background of Form MSME-1:
This form MSME-1 filing requirement comes from MCA circular dated 22nd January 2019. It is a filing to be done within 30 days from the end of every half year. This circular requires the companies who receive supplies of goods/services from Vendors registered as micro or small enterprises under MSME Act, 2006 and have not paid them within 45 days of receipt of goods / services, to intimate about such outstanding payment to ROC through this form MSME-1. The governing section for filing of this form is Section 405 of the Companies Act 2013 which specifies a penalty on companies and their officers in default for not filing this form of Rs. 20,000/- and a continuing penalty of Rs. 1000/- per day during which the default continues.
Earlier contents of the form when it was on V2 portal of MCA:
Earlier when this Form MSME-1 was on V2 portal of MCA, the companies filing this form were required to give details of such payments outstanding as at the end of half year, towards Vendors registered as micro and small enterprises which were outstanding for a period exceeding 45 days from the date of receipt of goods or services. Hence, all those companies which used to make payments to all these vendors within a period of 45 days of receipt of goods / services were not required to file this form. But with this form getting transited to V3 portal, it is asking for many more details and practically all companies will require filing of this form irrespective of their payment cycle to these vendors.
Additions to revised form MSME-1 in V3 portal:
The new V3 version of Form MSME-1 asks for below additional details regarding payments to vendors registered as micro and small enterprises: –
Micro and Small vendors to whom payment has been done during half year and within 45 days
Micro and Small vendors to whom payment has been done during half year but after a period of 45 days
Micro and small vendors whose payment is outstanding as of end of half year, but 45 days are not yet over (o/s for less than 45 days)
Micro and small vendors whose payment is outstanding as of end of half year, and 45 days are over (o/s for more than 45 days)
Earlier, in V2 version, the form asked only about the details mentioned in point number 4 above. So if companies did not keep any payment outstanding as at the end of half year for Vendors who are registered as Micro or small enterprises, then this form was not to be filed even if during the half year, payment was done to such vendors beyond 45 days.
However, now the form asks additionally about points 1 to 3 as well.
Effects of change in form.
This additional information asked in the form is a significant change. By this change, the requirement of filing form MSME-1 will become applicable to each and every company who are purchasing goods / availing services from any Vendor who is registered as Micro or small vendor, as the companies who make the payment within 45 days are also required to intimate about the payments made in this form.
Conclusion:
In budget 2024, the honorable finance minister had announced that, no income tax deduction shall be available on amounts not paid to micro and small enterprises within 45 days. The data collected from this form may also be useful in enforcing this income tax related amendment. Hence, it is very important that all companies have a system for identifying and collating data about their Vendors as to whether they are registered as Micro or small enterprises? If yes, then the data about payments made to them need to be maintained systematically and this form be filed within 30 days after the end of every half year.
ROCs have already started initiating Adjudications against companies who have not filed this form if it was applicable. With this transition from V2 to V3 portal, ROCs will have more and more data about this, and they will be in better position to Adjudicate any lapses in this regard.