Ministry of Micro, Small & Medium Enterprises (MSME) was passed in India in the year 2006. Enterprises under the manufacturing sector and enterprises under the services sector are the two types of enterprises that can get registered under the MSME Act. The pillar of strength for the economy of the country is MSME. Micro, small and medium enterprises are very essential for advanced as well as developed countries. MSME is required to empower the economy and employment of the Nation.
The Government of India had introduced Micro, Small & Medium Enterprises Development (MSME) for facilitating the promotion and development of MSMEs for the following reasons: –
- To Improve the realization of payments of MSMEs
- To implement statutory consultative and recommendatory policies,
- To introduce statutory registration procedures of MSMEs and a Statutory basis for the purchase preference and credit policies
- To remove impediments due to multiple laws
The MSME Sector
MSMEs constitute a substantial part of industrial production in developing countries like India. The MSME sector is considered to provide big employment opportunities and is one of the reasons for economic growth in the developing countries
- MSMEs have the efficiency to compete with their counterparts such as domestic and foreign enterprises.
- The MSME Registration certificate can be acquired easily but it is important to meet the specified standards with the compliances as it permits all the MSMEs to function smoothly without any hindrance.
- The interest of the MSME businesses can be protected under the MSME Act.
- The MSME Samadhaan was launched by The Ministry of Micro, Small & Medium Enterprises (MSME) on October 30, 2017.
- To empower micro and small enterprises in India the MSME was launched. If there are outstanding payments by the Central Ministries/Departments/CPSEs/State Governments then a case can be registered directly about the delayed payment.
The Compliances of MSME
- Section 9 of the MSMED ((Micro, Small and Medium Enterprises Development) Act, defines specified companies for which MSME Form 1 is very important compliance.
- MSME Form 1 is filed by these specified companies on a half-yearly basis to the Ministry of Corporate Affairs (MCA).
- The specified companies have to submit the yearly return on a half-yearly basis to the Registrar of companies (ROC) regarding the outstanding payments to MSMEs, which contain information on the amount of payment due and what was the reason for the delay.
- The aforementioned specified companies can file the MSME 1 Form only if their outstanding payment to MSMEs suppliers has exceeded 45 days.
MSME Form 1 (MCA)
In the MSME Form 1, thorough and complete information is given on a half-yearly basis regarding the outstanding payments to Micro or Small Enterprises for a time exceeding 45 days with the Registrar. The Ministry of Corporate Affairs has made changes in the context of protecting and safeguarding the interest of small enterprises or businesses.
MSME Form 1 on a half-yearly basis has to be filed by the specified enterprises that operate in India as MSME. To close outstanding dues these enterprises, have to file the Form and it has to be filed within 30 days of the announcement of the notification.
There are basic compliances of MSME that one should be aware of even if the registration process for MSME is completed.
- Every MSME that operates in India has Compliance. Compliance is mandatory for enterprises under MSME to run.
- Section 9 of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 defines the MSME Form 1. The specified form should be filed on time.
- In India on a half-yearly basis, every MSME has to file the MSME Form 1 with India’s Ministry of Corporate Affairs.
- The director/manager /company secretary/CEO/CFO can digitally sign the MSME Form 1 as they are the authorized persons of the Company.
- DIN details have to be provided for the director and the manager, company secretary, CEO, and CFO PAN Card details have to be provided.
- In the case of the supplier; The FYI Form, FY to, Supplier’s Name, Supplier’s details on the PAN, the due amount and the date from which the amount was due, the reason for the delayed amount to be paid, and if there is any optional attachment it has to be provided. These details have to be furnished for each supplier.
Every MSME Has Few Core Responsibilities After the Registration Process is Completed.
For MSME operations, The MSME Registration is not enough, all the companies need to comply with the mandatory compliances for the MSME operation. And the major responsibilities include:
- All the suppliers under an MSME have to be registered under the MSME Act.
- At the end of a financial year if there is any due payment it has to be checked by the MSME. The due payments must not be exceeding 45 days from the acceptance of goods and services.
- Filing of returns for due payments is a must and it has to be done by all the MSMEs. In the MSME form 1, this would be done and the reason for the delay should be mentioned.
Certain Specifications Are Required, Such As: –
- The total amount of payment due is essential
- The information of the supplier enterprise
- The responsibility is initiated on a certain date, therefore the date from which the responsibility was initiated should be stated.
- Supplier enterprises PAN Card is a must.
It is mandatory to comply with these compliances or there would be penalties for not doing so. The MSME that fails to meet the compliances will be responsible for the below-mentioned penalties
- As per Section 405(4) of the Companies Act, 2013, on the defaulter company, a fine of INR 25,000 would be imposed.
- There would be imprisonment of six months as well for any officer in default under this provision.
The burden of compliance on MSME is eased by the quarterly return filing option. If monthly returns are filed then it is an attractive option for large taxpayers who are dealing with the MSME. Every MSME in India has standard compliances and the compliances are altered or renewed with time, therefore the MCA portal should be checked regularly.