[Opinion] Provisions relating to MSME-1 Form – Case Study
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- Last Updated on 7 September, 2022
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[2022] 142 taxmann.com 124 (Article)
1. Micro, Small and Medium Enterprises Development (MSMED) Act 2006
The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs and the Act also seeks to facilitate the development of these enterprises and enhance their competitiveness. The act also protects the Micro. Small and Medium Enterprises for getting their payment well within the date and in case of delay, the buyer has to make payment with interest. Besides the above protection, there is also a disclosure requirement in section 22 of the MSMED Act that the buyer need to disclose the unpaid amount with interest in the annual statements of the company. The act further provides that the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues are actually paid to the small enterprise.
Relating to the determination of dues to Micro, Small and Medium Enterprises, payable to MSME, the same is required to be determined by identifying the Micro, Small and Medium Enterprises based on the information available with the Company.
The disclosure, therefore required in the annual financial statement of the company as per the provisions of the MSMED Act, is as under: – (by way of illustration)
2. In the Balance sheet, the required disclosure
Under the heading Liabilities – in sub heading current liabilities the disclosure would be:-
| Current liabilities | As at the end of the | ||
| Current ear | Last year | ||
| Non-current liabilities would be stated as (a) Borrowings (b) Other financial liabilities and Provisions followed by Total non-current liabilities Thereafter:- | |||
| Total non-current liabilities | |||
| Financial liabilities | |||
| (a) Trade payables ( refer note —) | xxxxx | xxxxx | |
| – Total outstanding dues of micro, small and medium enterprises | |||
| – Total outstanding dues of creditors other than micro, small and medium enterprises | xxxxx | xxxxx | |
| (b) Other financial liabilities | xxxxx | xxxxx | |
| Other current liabilities | xxxxx | xxxxx | |
| Provisions | xxxxx | xxxxx | |
| Total current liabilities | xxxxx | xxxxx | |
| Trade payable | As at the end of the | |
| Current ear | Last year | |
| Total outstanding dues of creditors other than micro, small and medium enterprises | xxxxx | xxxxx |
| Total outstanding dues of creditors other than micro, small and medium enterprises | ||
| (i) Related Parties (refer note —) | xxxx | xxxxx |
| (ii) Others | xxxx | xxxxx |
| Total | xxxxx | xxxxx |
3. The relevant provisions of the Companies Act 2013 on this matter
As per the provisions of sub-section (1) of section 405 of the Companies Act, he Central Government may, by order, require companies generally, or any class of companies, or any company, to furnish such information or statistics with regard to their or its constitution or working, and within such time, as may be specified in the order.
Sub-section (2) of section 405 of the Companies Act 2013 states that every order under sub-section (1) shall be published in the Official Gazette and may be addressed to companies generally or to any class of companies, in such manner, as the Central Government may think fit and the date of such publication shall be deemed to be the date on which requirement for information or statistics is made on such companies or class of companies, as the case may be.
Sub-section (3) of section 405 of the Companies Act 2013 states that for the purpose of satisfying itself that any information or statistics furnished by a company or companies in pursuance of any order under sub-section (1) is correct and complete, the Central Government may by order require such company or companies to produce such records or documents in its possession or allow inspection thereof by such officer or furnish such further information as that Government may consider necessary.
Further to the above, sub-section (5) of section 405 of the Companies Act 2013, states that where a foreign company carries on business in India, all references to a company in this section shall be deemed to include references to the foreign company in relation, and only in relation, to such business.
In exercise of the power under section 405 of the Companies Act 2013, the Government has notified the following notification bearing no. S.O 368(E) dated 22nd January 2019 and the content of the notifications is produced below:-
“Whereas, the Central Government vide notification number S.0 5622(E), dated the 2″” November, 2018 has directed that all companies who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter referred to as “Specified Companies”), shall submit a half yearly return to the Ministry of Corporate Affairs stating the following :
(a) The amount of payments due; and
(b) The reasons of the delay”.’
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