Form MSME – 1

In a post “Return about Payment to MSME Suppliers” earlier here, we discussed two notifications regarding the half-yearly return on the amount of payment due beyond the statutory period of 45 days and the reason of such payment delay. We had a brief discussion in the notified form in that post. We will discuss the electronic version of the Form which is required to be filed now.

Due Date

The Ministry of Corporate Affairs on 1^st May 2019 made available the electronic version of form MSME – 1 which is required to be filed by the companies.

Accordingly, the due date of filing of the form for the first time has been changed by the Government.

In case of Initial one-time return in Form MSME – 1 notified due date was 20^th February 2019 (being 30^th day from 22^nd January 2019) while in case of first time half yearly turn due date was 30^th April 2019.

Accordingly to General Circular 1/2019 dated 21^st February 2019 due date for the first time form extended to reckoned from the date of said e-form is deployed on MCA21 portal for filing.

The due date for one-time return as on 22^nd January 2019 and first time half yearly return as on 31^st March 2019 shall be 30^th April 2019. So, a specified company needs to file two forms – MSME – 1 one as on 22^nd January 2019 and second as on 31^st March 2019. (No NIL return require)

For any return MSME – 1 to be filed after these initial two forms shall be as under –

Every specified company shall file a return as per MSME Form I annexed to this Order –

• by 31st October for the period from April to September; and
• by 30th April for the period from October to March.

Please refer to the relevant date section later in this post.

Contents of the Form

This form is also a dynamic form with a few possible improvements

Return option

The company will choose in the form which returns it is going to file –  a. Initial return giving information as on 22^nd January 2019; or b. Regular half yearly returns.

In case of an initial return, Item No. 3 will populate, otherwise, Item No. will populate. All other items shall remain the same.

In the case of an initial return, no period is required to be mentioned here. In the case of half yearly return, the company will choose for which half year it is going to file the form.

Here, there are two discrepancies in the field here:

1. The form actually seeks information at the ending date of the half year. Logically, there should be an option like a. half year ended on 30 September or b. half year ended on 31 March.
2. The Form seems to be not supportive for a late filing beyond a year. One cannot file the form for a half year ending on 31^st March 2019 on 1^st May 2020. This issue needs immediate correction.

Special Note for Item 3 and 4

There are two important points:

1. Item 3 and 4 is designed in such a way that a company may need to file more than one Form MSME for the same purpose. One form may accept details for 99 suppliers. In case of more than 99 suppliers to be reported, the company needs to file more than one MSME – 1. It is advisable to mention this in an optional communication attached with the form to avoid any confusion.
2. NIL return is not required to file accordingly this form does not accept 0 in as a number of MSME suppliers in item 3 and item 4.

Item 3 – initial return as on date of notification of order (22^nd January 2019)

Item 3(a) accepts any amount due on the date of notification. This amount is not auto-calculated from the 5^th column of item 3(b). The company filing it needs to take care of any calculation mistake. I suggest auto calculation in the form to avoid mistake and help stakeholders.

First two column of item 3(b) have limited use and not helpful. The company needs to mention the initial date of the financial year in which the first default against that particular supplier was made. Similarly, the company needs to mention the last date of the financial year in which the last default against that particular supplier was made. In the last column date of last default should be mentioned.

In my understanding, it would have been better if the form seeks details invoice wise with the due date of payment as an excel attachment. The intention of the MSME Act and the notification made thereunder is very clear – No one should default in payment to an MSME. Secondly once a company file this form, it is sufficient acknowledgement of a default or non – payment to a particular MSME. Such acknowledgement default will have serious repercussion.

Item 4 – half yearly return

This is similar to item 3 described hereinabove. In the case of an initial return, the reference date is very clear. But, in half-yearly return, it is the nearest last date of the half year you choose for filing the form. One cannot file the form for a half year ending on 31st March 2019 on 1st May 2020. This issue needs immediate correction.

In my understanding, it would have been better if the form seeks details invoice wise with the due date of payment as an excel attachment. The intention of the MSME Act and the notification made thereunder is very clear – No one should default in payment to an MSME. Secondly once a company file this form, it is sufficient acknowledgement of a default or non – payment to a particular MSME. Such acknowledgement default will have serious repercussion.

Item 5 – Reasons for Delay in the amount of payments due

This may be a relief from any repercussion we talk about against discussion on item 3 and Item 4. However, item 5 is poorly drafted. Each default may not same but invoice wise.

There may be several reasons for default – insufficient fund, unsettled dispute, technical incorrectness in the invoice may be few. Once we received an invoice, it becomes payable and in case of MSME supplier, a company need to pay invoice it within 45 days of its receipt or before the end of that half year so that we need no reporting under Form MSME – 1.

In case of different reasons for each default, it is advisable to file an reason for default in an attachment.

Important discussions

There are few questions frequent raised –

Registered MSME

In my view, the registration of MSME is not required. Registration is a mere formality. Where a person falls within the definition of MSME, we need to report. The important point is, how the company will know about the status of the supplier as MSME. We need proper communication from the supplier either latest audited balance sheet showing his investment in plant and machinery within the limit or his MSME registration.

Once, that MSME crossed the threshold, it ceased to be MSME whether or not its registration is surrendered.

Relevant dates

For Initial return:

The cutoff date for Invoices to report:  Saturday, 8 December 2018

The cutoff date for invoices to payment or report: Saturday, 22 January 2019

Due date of filing the Initial Return MSME – 1: 30 May 2019

For half yearly return for the half year ending on 31^st March of the year

The cutoff date for Invoices to report: 14 February of the year (15 February in a leap year)

The cutoff date for invoices to payment or report: 31 March of the year

Due date of filing the half-yearly Return MSME – 1: 30 April of the year (for present half yearly return 30 May 2019)

For half yearly return for the half year ending on 30^th September of the year

The cutoff date for Invoices to report: 16 August of the year

The cutoff date for invoices to payment or report: 30 September of the year

Due date of filing the half-yearly Return MSME – 1: 31^st October April of the year

Fee for filing

Presently there is no fee or additional fee for filing this form. It seems this is to give minor relief to companies filing this form first time.

Penal provision

Form MSME -1 is notified by the order issued under Section 405. If any company fails to comply with an order made under sub-section (1) or subsection (3), or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company shall be punishable with fine which may extend to twenty-five thousand rupees and every officer of the company who is in default, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to three lakh rupees, or with both.