Delayed payment of GST to MSME vendor

Great question, Dheeraj.

You're dealing with a common yet misunderstood issue related to MSME dues, especially around GST component held back and Section 405 of the Companies Act, 2013.

✅ MSME Return – Legal Requirement

As per Section 405 of the Companies Act, 2013, read with MSME Return Rules, every specified company (including private limited companies) that:

Receives goods or services from MSME vendors and
Whose payments to such vendors exceed 45 days from the date of acceptance or deemed acceptance

is mandatorily required to file MSME Form 1 (half-yearly return) with ROC, regardless of:

• Any internal payment terms (like GST on receipt basis)

• Any mutual agreement

• Any partial payments already made

🔍 Clarifying Common Misconceptions

❌ “No outstanding dues” argument

Even if the principal amount is paid within 45 days, if GST component is withheld, then that part of the payment is still "due" to the MSME supplier.

Thus, outstanding dues exist — at least partially.

✅ What counts as “outstanding” dues?

As per the intent of the law and guidance from ROC communications:

• GST held back

• Retention money

• Any portion of invoice unpaid beyond 45 days

All of these qualify as "outstanding dues" and must be disclosed.

📄 MSME Form 1 – Filing Applicability

You're required to file MSME Form 1 twice a year if:

• You’ve delayed any payment beyond 45 days, irrespective of the amount.

• Even if it’s only GST that’s withheld, it still counts.

The due dates are:

• April to September: File by 31st October

• October to March: File by 30th April

💡 Recommended Action for Your Client

• Acknowledge that GST held is an unpaid component of MSME invoice.

• File MSME Form 1 disclosing the dues, even if balance payment (excluding GST) was made within 45 days.

• Avoid using PO terms (like "GST on receipt from NHAI") as a justification — law overrides contract in this case.

🧾 Relevant Provisions

• Section 405 – Power of Central Government to require companies to furnish information.

• MSME Notification (2019) – Companies must report payment delays > 45 days to MSMEs.

• MSME Development Act, 2006 – Section 15 – Timely payment to MSMEs is mandatory, regardless of buyer’s cash flow.