Companies delaying payments by more than 45 days to micro and small enterprises (MSEs) for goods or services purchased from them will have to provide additional information in a revised MSME form 1, according to a July 15 notification by the Ministry of Corporate Affairs.
The half-yearly form introduced by the government in January 2019 so far required buyers, also referred to as specified companies for delaying payments, to share information on the amount due, date from which it is due and reason for the delay under the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019.
The revised form under the amended order called Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Amendment Order, 2024, now seeks additional information.
This includes amount paid within 45 days through the invoice discounting platform TReDS or other payment mode, amount paid after 45 days, amount outstanding for 45 days or less and amount outstanding for over 45 days other than the reason for the delay in payment or outstanding amount and name and PAN of the MSE supplier.
The buyers are required to file the MSME form 1 by October 31 for the April to September period and again by April 30 for the period October to March every year.
The penalty for failing to pay the amount within 45 days is reportedly Rs 20,000 by the company and every officer involved in default. Subsequent failures lead to Rs 1,000 per day and up to Rs 3 lakh.
The form has to be digitally signed by either the director, managing director, manager, company secretary, CFO, CEO or any other authorized representative of the company. Moreover, director identification number of the director or managing director or DIN or PAN of the manager or CEO or CFO or authorized representative has to be provided.
As per the government’s delayed payment monitoring portal MSME Samadhaan launched in October 2017, 1.98 lakh delayed payment applications involving Rs 44,757 crore have been filed by MSEs so far, of which only 38,095 applications involving Rs 6,563 crore have been disposed by MSE Facilitation Councils. 18,338 applications involving Rs 2,307 crore have been mutually settled between buyers and sellers while 52,983 applications involving Rs 10,216 crore have been rejected by the councils.
Importantly, the government had brought in a new clause (h) on April 1, 2024, under Section 43B of the Income Tax Act to allow expenses to MSME buyers only if paid within 45 days in the year of actual payment instead of the year when it was incurred as an expense