Micro, small, and medium enterprises, also called MSMEs, play pivotal roles in the country’s economy. They are usually classified based on their investment in machinery and annual turnover. In 2019, the Government of India issued a notice stating that companies with outstanding dues to MSME enterprises had to file the particulars of all current dues using the MSME Form 1 with the Registrar of Companies (ROC).
Filling out the MSME Form 1 has many precise steps, and following them can seem daunting. However, a precise checklist can help you streamline the process. In this article, we will explore what the MSME Form 1 is, how to fill out the MSME form, and more.
What is the MSME Form 1?
MSME Form 1 is an important regulatory document. The Ministry of Corporate Affairs took steps to make it compulsory for all companies with outstanding dues to suppliers registered under the MSME Act to fill out the form. This compliance regulation ensures that MSMEs receive payment for their products and services within the stipulated time.
The form is important for several reasons. It ensures payments to MSMEs are not delayed, which is essential for their liquidity and regular operations. The form also helps increase transparency between large corporations and MSMEs, creating a fairer trade environment. This MSME form is also helpful in complying with legal requirements, allowing them to prevent legal penalties associated with late payments to MSMEs.
MSME Form 1 applies to companies with outstanding payments due to MSME-registered suppliers. If the outstanding amount has not been settled within 45 days, the company must fill out Form 1 to report any payment defaults.
How to Fill MSME Form 1?
The MSME form-filling process is systematic and organised. Companies must ensure that they fill in all details accurately. Here’s a step-by-step guide to take you through the process:
1. Download the form
Download the form from the MCA portal online.
2. Prefill your details
Prefill the required details. This usually includes your company’s CIN (Corporate Identification Number). After filling out your CIN, some details will be prefilled automatically.
3. Enter the creditor (MSME) details
After filling in your company details, you must input the details of each MSME creditor. This includes the creditor’s name, the amount, and the timeline of the payment.
4. Outline the reasons for delays in payment
You must outline the reasons for any payment delays directly in the form. This process must be followed for every delay.
5. Attach any required documents
The MSME Form 1 usually does not require any mandatory document attachments. However, you can add any supporting documents that will help clarify the reasons for delays or transactions.
6. Conduct a “Pre-Scrutiny” check
You will find the “Check Form” or “Pre-Scrutiny” features before submitting the form. Remember to use these features to ensure all your data is correct and complies with MCA requirements.
7. Add your signature
Before submission, all company directors must sign the form using the Digital Signature Certificate.
8. Upload your form
Submitting your MSME form typically requires no fees. After ensuring all information is added and accurate, you can upload it onto the MCA portal.
What Details are Required to File the MSME Form 1?
Before you fill out the MSME form, it is essential to ensure you have all the necessary documents and information. This will help you fill in your details quickly and easily without missing important information. The MSME form requires specific details to ensure compliance with regulatory requirements.
Your company’s identification numbers, including the CIN and PAN, are required. Company contact information, such as the name, email, and physical address, is also required. The details of the MSME supplier and their PAN number are also required.
Next, you must provide the total outstanding amount due. This number includes any payments made after 45 days and any amounts that are still pending. You must also give the date from which the outstanding payment is due. The financial year for the reported data is also necessary.
It would help if you also prepared the reasons for payment delays. These could include late invoices, disputes related to goods and services, technical problems with the concerned financial institution, and more. Stating clear reasons for payment delays can help resolve any payment issues and clarify the situation.
Along with the above information, keeping the necessary documents handy is important. This includes a Digital Signature Certificate (or DSC) that all the company’s directors signed.
Is There a Penalty for Failing to File the MSME Form 1?
MSME Form 1 is a vital regulatory document that protects MSMEs from payment delays and ensures timely settlement of any outstanding dues. Failure to comply with the MSME form filing can result in penalties under the Companies Act of 2013. This includes a penalty of Rs. 10,000 and an additional Rs. 1,000 for each day after the first contravention.
Defaulting on payments can result in penalties on directors and officers of the company. These fines can amount up to Rs. 50,000. The Registrar of Companies can also issue an adjudication notice. In more extreme cases, there are provisions for imprisonment for up to six months. Heavy fines, ranging from Rs. 25,000 to Rs. 3,00,000, may also be imposed on every defaulting officer in the company.
Wrapping up
Staying on top of all government regulations and compliance practices is essential to ensure your business operations run smoothly. Keeping up to date with MSME Form 1 filings is crucial. It protects micro, small, and medium enterprises, ensuring they receive their dues promptly and efficiently and maintain their liquidity. However, it also benefits larger companies, promoting transparency and fair trade practices.
If you want to start your business journey or already have a company, funding is just as crucial as compliance regulations. Finding the right business loan for your company can be difficult. Tata Capital can help ensure your business’s operations run smoothly by providing lucrative business and MSME loans, expert guidance, and financial advice.
20 November 2024
5 mins read
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