Companies need to file MSME payment data before 30th April 2023

Arjuna (Fictional Character): Krishna, What is the new buzz regarding the filing of Form MSME-1 for company taxpayers?

Krishna (Fictional Character): Arjuna, Every year, all company taxpayers need to file form MSME-1 by a notification dated 2nd November 2018 but it holds a huge significance this year as the payments would be disallowed by the Income Act authorities if payment is not made within 45 days.

Arjuna (Fictional Character): Krishna, What are the applicability and due date of MSME Form 1?

Krishna (Fictional Character): Arjuna, The Central Government has directed that the form is applicable to all companies, that get their supplies of goods or services from micro and small enterprises and whose payments exceed forty-five days.

MSME-1 has to be filed every half yearly, the due date of Form MSME I is 30th April 2023 for the period October 2022 to March 2023 and 31st October 2023 for the period April 2023 to September 2023.

Arjuna (Fictional Character): Krishna, What are the details required to furnish in MSME Form 1?

Krishna (Fictional Character): Arjuna, Apart from the basic details, in respect of the total outstanding to Micro and Small Enterprises, the details required are-

1. Financial Year
2. Name of Supplier
3. PAN of Supplier
4. Amount Due
5. Date from which the amounts are due.
6. The reason as to why there was a delay in payments.

Arjuna (Fictional Character): Krishna, What will be the implications of this MSME Form 1?

Krishna (Fictional Character): Arjuna, The details furnished in this form will have huge implications this Financial Year. As we all know, there is a new provision that provides that payments due to Micro and Small enterprises shall be paid within 45 days, or else the entire expenditure claimed shall be disallowed. With the information furnished in MSME-1, now income tax will have ready data as to when the payments were not made within 45 days for disallowing the expenditure claimed by the company.

Arjuna (Fictional Character): Krishna, What is the Penalty for Non-Submission of MSME Form 1?

Krishna (Fictional Character): Arjuna, in case a company fails to file MSME Form 1 before the due date, the company and every officer of the company who is in default shall be liable to a penalty of Rs 20,000/- and in case of continuing failure, with a further penalty of Rs 1,000/- for each day after the first during which such failure continues, subject to a maximum of Rs 3,00,000/-.

Arjuna (Fictional Character): Krishna, what should one keep in mind considering the above details?

Krishna (Fictional Character): Arjuna, MSME Form 1 is a mandatory form that needs to be filed by all companies. The information provided in this form will be used for statistical and policy purposes and to monitor whether the payments are made to MSMEs within 45 days. This form will serve as an additional check to the income tax department for disallowance of the payments made to Micro and Small Enterprises. This form is also helpful for the tax professional during an audit since this will be ready data available for checking which payments are to be disallowed.