Understanding Form MSME-1 (Company Compliance in 2025)

Ø Introduction

Form MSME-1 is a half-yearly return mandated by the Ministry of Corporate Affairs (MCA) under Section 405 of the Companies Act, 2013. Its primary objective is to ensure transparency regarding outstanding payments to Micro and Small Enterprises (MSEs) and to promote timely payments to these entities.

Ø Applicability

Who is required to file Form MSME-1?

Any company (public or private) that:

1. Has received goods or services from suppliers registered as Micro or Small Enterprises under the MSMED Act, 2006; and

2. Has payments outstanding to such suppliers exceeding 45 days from the date of acceptance or deemed acceptance of the goods or services.

Exemptions:

• Companies with no dealings with Micro or Small Enterprises.

• Companies that have made all payments to MSEs within 45 days.

• Transactions with Medium Enterprises are not covered under this reporting requirement.

Ø Key Changes in 2025: Transition from V2 to V3 Portal

In 2025, the MCA transitioned Form MSME-1 from the V2 to the V3 portal, introducing significant changes to enhance disclosure and compliance:

1. Expanded Reporting Requirements:

   • Payments made within 45 days to MSEs during the half-year.

   • Payments made after 45 days to MSEs during the half-year.

   • Outstanding amounts to MSEs as of the end of the half-year, segregated by:

     • Less than 45 days.

     • More than 45 days.

2. Enhanced Disclosure:

   • Detailed information on each MSE supplier, including name, PAN, and amount due.

   • Reasons for delays in payments exceeding 45 days.

These changes aim to provide a comprehensive view of a company's payment practices concerning MSEs, ensuring greater accountability.

Ø Filing Timeline

Form MSME-1 must be filed twice a year:

• For the period April to September: Due by 31st October.

• For the period October to March: Due by 30th April.

Ø Filing Fees and Penalties

• Filing Fees: There is no fee for filing Form MSME-1.

• Penalties for Non-Compliance:

  • Company: Fine up to ₹25,000.

  • Officers in Default: Imprisonment up to 6 months and/or fine between ₹25,000 and ₹3,00,000.

It's crucial to note that while there is no fee for late filing, non-compliance can attract significant penalties under Section 405(4) of the Companies Act, 2013.

Ø Practical Scenarios

1. If payments to MSEs are made within 45 days: No need to file Form MSME-1.

2. If payments to MSEs are made after 45 days but before the end of the half-year: As per the updated V3 form, such transactions must now be reported.

3. If payments to MSEs are outstanding for more than 45 days as of the end of the half-year: Mandatory to file Form MSME-1.

Ø Conclusion

The 2025 updates to Form MSME-1 reflect the MCA's commitment to strengthening the financial ecosystem for Micro and Small Enterprises. Companies must adapt to these changes, ensuring timely and accurate disclosures to maintain compliance and foster trust within the business community.