Adjudicating penalty on delay filing of MSME
MSME stands for Micro, Small, and Medium Enterprises. These enterprises are classified based on their investment in plant and machinery or equipment and annual turnover. The MSME sector plays a crucial role in the Indian economy by contributing to employment, manufacturing, and exports. Here’s a breakdown of the classification criteria for MSMEs as per the latest amendments:
- Micro Enterprises:
- Investment in Plant and Machinery or Equipment: Up to ₹1 crore
- Annual Turnover: Up to ₹5 crore
- Small Enterprises:
- Investment in Plant and Machinery or Equipment: Up to ₹10 crore
- Annual Turnover: Up to ₹50 crore
- Medium Enterprises:
- Investment in Plant and Machinery or Equipment: Up to ₹50 crore
- Annual Turnover: Up to ₹250 crore
MSME Filing Requirements
MSME Form 1 is a form mandated by the Ministry of Corporate Affairs (MCA) for certain companies to report their payments to MSMEs. The purpose of this form is to ensure that companies make timely payments to their MSME suppliers and disclose details of any outstanding payments. The form is filed bi-annually.
Purpose of MSME Form 1
- To track the payments delayed by more than 45 days to MSME suppliers.
- To ensure companies make prompt payments to MSMEs, helping these small enterprises maintain their cash flow.
Who Needs to File MSME Form 1?
Every specified company that has received goods or services from MSME suppliers and whose payments to these suppliers exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services.
Information Required in MSME Form 1
- CIN (Corporate Identification Number) of the Company
- Name and Address of the Registered Office
- Outstanding Amount to MSME Suppliers
- Reasons for the Delay in Payment
- Details of MSME Suppliers: Name, PAN, and Udyog Aadhaar Number (if available)
Penalty for Non-Filing/Delayed filing of MSME as per Section 450
Section 450 of the Companies Act, 2013 specifies penalties for non-compliance or delayed compliance with provisions of the Act when no specific penalty is provided. This section applies to non-filing or delayed filing of MSME Form 1.
General Penalty Under Section 450:
- The company shall be liable to a penalty of ₹10,000.
- In case of a continuing failure, there is an additional penalty of ₹1,000 for every day during which the failure continues, subject to a maximum of ₹2,00,000.
- Every officer of the company who is in default shall be liable to a penalty of ₹10,000.
- In case of a continuing failure, there is an additional penalty of ₹1,000 for every day during which the failure continues, subject to a maximum of ₹50,000.
Ensuring timely and accurate filing of MSME Form 1 is crucial to avoid these penalties. Compliance with this requirement helps in maintaining transparency and supporting the financial health of MSME suppliers by promoting timely payments.
Steps to Avoid Penalties
- File MSME Form 1 within the prescribed deadlines.
- Maintain accurate records of all transactions and payments to MSME suppliers.
- Regularly review compliance requirements and deadlines.
- Consider engaging a Company Secretary or compliance officer to ensure adherence to all legal obligations.
By adhering to these practices, companies can avoid the penalties associated with non-filing or delayed filing of MSME Form 1 and support the financial stability of their MSME suppliers.
Conclusion
Timely compliance with MSME filing requirements is crucial to avoid penalties and ensure smooth business operations. Companies should put in place effective compliance mechanisms, maintain proper records, and regularly review their filing status to mitigate the risk of delays and associated penalties.
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