A Study of Provisions of the MSMED Act & Related Disclosure Under Schedule III of Companies Act
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- 2 Min Read
- By Taxmann
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- Last Updated on 19 August, 2023
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Micro, Small, and Medium Enterprise (MSME) plays an important role in the growth of India’s economy. To protect the interest of MSME enterprises and enhance their sustainable growth, the Government of India (GoI) has formulated, “The Micro, Small and Medium Enterprises Development Act, 2006”. To enhance transparency and growth of MSME vendors, this Act requires specific disclosures to be made in the annual financial statement of the buyer whose financial statements are required to be audited under any statute. Thus, the buyer entity shall ensure the completeness and accuracy of the disclosures required under MSMED Act. This discussion includes analysis of MSMED Act and the necessary disclosures to be made by companies in its financial statement as per MSMED Act and Ind AS schedule III.
Section 15: Liability of buyer to make payment
Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day.
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed 45 days from the day of acceptance or the day of deemed acceptance.
Section 16: Date from which and rate at which interest is payable
Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at 3 times of the bank rate notified by the Reserve Bank.
This story further discusses provisions of the MSMED Act and related disclosure along with an extract of disclosure made by Tata Motors and essential disclosure of outstanding MSME dues under Schedule III of Co’s Act.
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