Change in definition of MSME & filing of form MSME-1?

WHAT IS MSME?

Micro, Small, and Medium Enterprises

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified into two Classes:

1. Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.

2. Service Enterprises:- The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

The limit for investment in plant and machinery/equipment for manufacturing/service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under:

	Manufacturing Sector	Service Sector
Enterprises	Investment in plant & machinery	Investment in equipment
Micro Enterprises	Does not exceed twenty-five lakh rupees	Does not exceed ten lakh rupees:
Small Enterprises	More than twenty-five lakh rupees but does not exceed five crore rupees	More than ten lakh rupees but does not exceed two crore rupees
Medium Enterprises	More than five crore rupees but does not exceed ten crore rupees	More than two crore rupees but does not exceed five crore rupees

Note:

Update:

The central government has recently revised the investment limit of MSME and introduced an additional criterion of “turnover” as it revised the definition of the sector that is much needed and the welcoming move by the Government during this time of the pandemic. Let’s have a glimpse of revised criteria of MSME:

Existing MSME Classification
Criteria: Investment in Plant & Machinery or Equipment
Classification	Micro	Small	Medium
Mfg. Enterprise	Investment < Rs.25 Lakhs	Investment<Rs. 5 Cr	Investment < Rs. 10 Cr
Service Enterprise	Investment< Rs. 10 Lakhs	Investment < Rs. 2 Cr	Investment < Rs. 5 Cr.

Revised MSME Classification
Composite Criteria: Investment and Turnover
Classification	Micro	Small	Medium
Mfg. Enterprise and Service Enterprise	Investment < Rs. 1 cr. And Turnover < Rs. 5 cr.	Investment < Rs. 10 Cr. And Turnover < Rs. 50 cr.	Investment < Rs. 20 Cr And Turnover < Rs. 100 Cr.

Mandatory Submission of E-Form MSME-1 with MCA by Specified Companies-As per the MCA Notification:

The Government has introduced the E form MSME-1 to strengthen the micro and small enterprises by prescribing a mandatory filing regime twice a year by their large customers.

The Order stated that, all companies who get supplies of goods/services from Enterprises and whose respective payments to such Enterprises exceed forty- five days from the date of acceptance or the date of deemed acceptance of such goods/ services (hereinafter referred to as “Specified Companies“), is required to submit a half-yearly return to the MCA stating the amount of payment due and the reasons for the delay. The Order required all Specified Companies to furnish details of all such outstanding dues by filing MSME 1.

(1) This Order maybe called the Specified Companies (Furnishing of information about the payment to micro and small enterprise suppliers) Order, 2019.

(2) Every specified company shall file in form MSME-1 details of all outstanding dues to Micro or small enterprises suppliers existing on the date of notification of this order within thirty days from the date of publication of this notification.

(3) Every specified company shall file a return as E-form MSME-1 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.

Amendment

1. As per the above notification every specified company (Received Goods &/or Services ‘from’ MSME and whose payment is due or not paid within 46 days) dealing with MSME shall mandatorily file a return with MCA in e-form MSME-1.

2. Return

There are two types of return:

Initial form

A) One Time Return (Due date to file-within 30 days of publication of these rules i.e. 20^thFebruary 2019 from the notification date (i.e. 22^nd January, 2019 + 29 days)

Information required to submit in One Time Return

* Total outstanding amount due as on 22.01.2019

* Particulars of Supplier (Financial years/particulars/Name/Pan No. /Amount due/date from which the amount due etc.)

* Reasons for the delay.

Regular form

B) Half Yearly Return

Due date of filing of Half Yearly Return ~

* For half-year period ‘October to March’ – 30^th April

* For Half-year period ‘April to September’ – 31^st October

Download: MSME Specified Companies (Furnishing of information about the payment to micro and small enterprise suppliers) Order, 2019.

Due date for Current year:

The Last date of filing MSME-1 for the half-year ended 31st March 2020 (October 2019- March 2020) is 30th April 2020.

Note: MCA has issued a general circular (circular no. 11/2020) dated 24^th of March 2020 with respect to Special Measures under Companies Act, 2013 (CA-2013) and Limited Liability Partnership Act, 2008 in view of COVID-19 (coronavirus) outbreak which states that:

No additional fees shall be charged for late filing during a moratorium period from 01sr April to 30th September 2020, in respect of any document, return, statement, etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including the financial burden of Companies/ LLPs at large but also enable long-standing, non-compliant companies/ LLPs to make a 'fresh start'. The Circulars specifying detailed requirements in this regard are being issued separately.

Note: NIL returns are not required to be filed.

Penalty for non-compliance:

Penal provisions for non-filing /wrong information will be penalized under section 405 of the Companies Act 2013 and penalty under the MSME Act 2006.

A failure to comply with the Order, shall attract a fine which is extendable to Rs. 25000/- (twenty-five thousand rupees). Further, any officer in default of the Specified Company shall be punishable with imprisonment which can extend to a period of six months or fine which can extend to three lakhs rupees, but not less than twenty-five thousand rupees or both.

Date from which and the rate at which interest is payable:

According to Section 16 of the MSME Act, 2006, where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.

Conclusion

MSME compliances are altered as per its requirements by the MCA. Also, MCA has made it mandatory for Specified MSME companies to file returns stating their due payments to them along with the reasons for the delay in E form MSME-1 on a half-yearly basis. In the current situation of COVID-19 pandemic, GoI may give some relaxation on part of compliances and take a decision to ease the MSME to regain the businesses.

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