Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, February 4, 2019

MSME Form 1 - Reporting of Payments Due Over 45 Days

The Central Government, vide notification number S.O. 368(E) dated 22nd January, 2019, directed that every specified company shall submit a half yearly return in MSME Form I furnishing details of outstanding payment to Micro and Small Enterprise suppliers.


All companies shall file Form MSME-1, who:
(a) receive supplies of goods or services from micro and small enterprises; and
(b) the payment for such micro and small enterprises is due for a period exceeding 45 days from the date of acceptance of the goods or services

Definition of Micro Enterprise and Small Enterprise

As per the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006:

Micro Enterprise
1. Engaged in the manufacture of goods, where the investment in plant and machinery does not exceed Rs. 25 lakhs; or
2. Engaged in providing services, where the investment in equipment does not exceed Rs. 10 lakhs.

Small Enterprise
1. Engaged in the manufacture of goods, where the investment in plant and machinery is more than Rs. 25 lakhs but does not exceed Rs. 5 crore; or
2. Engaged in providing services, where the investment in equipment is more than Rs. 10 lakh but does not exceed Rs. 2 crore.

These entities could be any of:
- Company
- Partnership
- Association of Persons
- Hindu Undivided Family
- Co-operative Society
- Proprietorship, etc.

Information to be Reported

1. Details of Company filing the form: CIN, PAN, Address, Email ID
2. Amount due to micro and small enterprises suppliers during the filing period
3. Particulars of the suppliers:
    a) Name
    b) PAN
    c) Amount due
    d) Date since when the payment is due
4. Reasons for delay in payment

Due Date for Filing

April to September - 31st October
October to March - 30th April

First Return

Every specified company shall file in MSME Form I details of all outstanding dues to micro or
small enterprise suppliers existing on the date of notification, i.e., on 22nd January, 2019, within thirty days from the date of publication of this notification, i.e., by 21st February, 2019.

Action Points

1. For swift compliance, the company should take a declaration from all of its vendors about if they fall under the definition of Micro or Small Enterprise as per the MSMED Act.
2. After identifying micro and small enterprises, an ageing of the amount outstanding to them should be prepared.
3. In case of amounts payable to them beyond 45 days, either the same should be paid on priority, or reason for delay should be recorded which will have to be reported in such Form.


Edit (12-Feb-2019)

Remarks for Filing of MSME Form:

1. The definition for MSME is investment in plant & machinery based only. The definition based on turnover is part of the MSME Amendment Bill 2018, but has not been tabled on the floor of the Lok Sabha for passing.

2. Since 2015, the Central Government has mandated obtaining of UAM (Udyog Aadhaar Memorandum). You may ask your suppliers to provide the UAM.

3. The ICAI has issued Guidance Note on reporting of outstanding payments to MSME in the Tax Audit Report. The same guidance may be applied while filing the Form MSME-1 with the ROC. There should not be any inconsistency between MSME reporting in Tax Audit Report and in Form MSME-1. The only difference would be on account of Medium Enterprises as amounts outstanding to them are not to be reported in the ROC Form yet.

4. If the vendor neither provides UAM/EM/SSI number, nor discloses whether or not it has applied for UAM within a reasonable time, then one may presume that they are not covered under the definition of MSME. However, such a disclaimer may be given in the form filed with ROC. Also, one should have documentary proof that the vendors have been asked to provide UAM, but they haven't responded or failed to provide it.


Edit (15-Feb-2019)

Format of Letter to be obtained from Vendors to establish their MSME status.

The Accounts Department
<Name of Company>
<Address>                                                                                     Date:

                Sub:       Vendor Classification as per MSME Act, 2006

Dear Sir,

We certify the following details about our enterprise as requested by you.





Nature of Enterprise
(Tick correct option)

Also, specify nature of activity

1.       Manufacturer

2.       Trader

3.       Service Provider

Classification as per MSMED Act 2006*
(Tick appropriate box)

1.       Micro Enterprise

2.       Small Enterprise

3.       Medium Enterprise

4.       None of the Above

If classified as Micro or Small Enterprise as per above, please attach self-attested copy of either of the following:
a)      MSME Registration Certificate or
b)      Udyog Adhaar Memorandum (UAM) or
c)       Declaration confirming the same

Thanking you.
Yours sincerely,

Name:                                                               Place:
Designation:                                                       Date: