An important update for MSMEs and big businesses in India. As per the latest update, Companies delaying payments to MSEs by more than 45 days will now have to provide additional information in a revised MSME Form 1 along with a new complaint system launching soon along with Online Complaint System under planning.
Consequences of Delayed Payments to MSMEs: Penalties and New Compliance Measures
Failure to pay the due amount to MSMEs within 45 days can result in a penalty of upto Rs 20,000 for the company. Furthermore, continuing delaying the payment can lead to a fine of Rs 1,000 per day, up to a maximum of Rs 3 lakh.
Expenses to MSME buyers are allowed only if business pays it within 45 days. However, the government is also planning an online compliant system which will help in online dispute resolution.
What is MSME Form 1?
MSME Form 1 is a half-yearly form introduced by the government in January 2019. The MSME Form 1 helps in tracking the delayed payments to MSMEs. Businesses had to report the following details only:
- the amount due,
- the date from which it was due,
- and the reason for the delay.
However, now there is a new online complaint system soon launching along with new MSME Form 1.
Revised MSME Form 1 Launched for Delayed Payments
Under the new amendment, known as the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Amendment Order, 2024, the revised MSME Form 1 for delayed payments now asks for more comprehensive information. Businesses must now report:
- The amount paid within 45 days through the invoice discounting platform TReDS or other payment methods
- The amount paid after 45 days
- The amount outstanding for 45 days or less
- The amount outstanding for over 45 days
- The reason for the delayed payment or outstanding amount
- The name and PAN of the MSE supplier
What are the deadlines and Penalties associated with MSME Form 1?
MSME Form 1 is to be filed twice a year.
- By October 31 for the period April to September
- By April 30 for the period October to March
Proposed amendments to the MSME Act
In addition to these measures, the government is proposing adjustments to the MSME Act to ensure timely payments to small firms.
This proposal intends to reinforce the current structure and enable faster settlements for late payments. It is projected to improve the financial health of MSEs by shortening the waiting period for their dues, encouraging a more favourable business climate.
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Moreover, if you need any further guidance related 45 days MSME Payment Rule, MSME Form 1 or MSME Registration, you can call our experts at: 8881-069-069 and get quick assistance.
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