Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006 strengthens provisions
relating to delayed payments to MSME’s by specifying a maximum credit
period and higher penal interest if payment is delayed beyond that
period. If there is a delay in payment, companies will have to mention the
reason for such delay in the statement of accounts. The provisions
relating to disclosure requirement are discussed below
Relevant definitions under Micro, Small and Medium
Enterprises Development Act 2006
Section 2(b) “appointed day” means the
day following immediately after the expiry of the period of fifteen days from
the day of acceptance or the day of deemed acceptance of any goods or any
services by a buyer from a supplier.
Explanation.—For the purposes of this clause,—
(i) “the day of acceptance” means,—
(a) the day of the actual delivery of goods or the rendering of
services; or
(b) where any objection is made in writing by the buyer regarding
acceptance of goods or services within fifteen days from the day of the
delivery of goods or the rendering of services, the day on which such objection
is removed by the supplier;
(ii) “the day of deemed acceptance” means, where no objection is made in
writing by the buyer regarding acceptance of goods or services within fifteen
days from the day of the delivery of goods or the rendering of services, the
day of the actual delivery of goods or the rendering of services;
Section 2(d) “buyer” means whoever buys any
goods or receives any services from a supplier for consideration;
Section 2(e) “enterprise” means an industrial
undertaking or a business concern or any other establishment, by whatever name
called, engaged in the manufacture or production of goods, in any manner,
pertaining to any industry specified in the First Schedule to the Industries (Development and
Regulation) Act, 1951 or engaged in providing or rendering of any
service or services;
Section 2(n) “supplier” means a micro
or small enterprise, which has filed a memorandum with the authority
referred to in clause (a) of sub-section (1) of section 8, and includes, –
– the National Small Industries Corporation, being a company, registered
under the Companies Act, 1956;
– the Small Industries Development Corporation of a State or a Union
territory, by whatever name called, being a company registered under the Companies
Act, 1956;
– any company, cooperative society, society, trust or a body, by
whatever name called, registered or constituted under any law for the time
being in force and engaged in selling goods produced by micro or small
enterprises and rendering services which are provided by such enterprises;
Classification of MSME:
Section 7 of the Act provides for the
following classification in respect of industries engaged in production or
manufacture of goods or rendering service enterprises:
|
Category |
(a)
Enterprises engaged in the manufacture or production, processing or
preservation of goods and whose investment in plant and machinery are
as specified below: |
(b)
Enterprises engaged in providing or rendering of services and whose investment
in equipment (original cost excluding land and building and
furniture, fittings and other items not directly related to the service
rendered or as may be notified under the MSMED Act, 2006) are specified
below. |
|
micro
enterprise |
does
not exceed Rs. 25 lakh; |
does
not exceed Rs. 10 lakh; |
|
small
enterprise |
is more
than Rs. 25 lakh but does not exceed Rs. 5 crore; and |
is more
than Rs.10 lakh but does not exceed Rs. 2 crore; and |
|
medium
enterprise |
is more
than Rs.5 crore but does not exceed Rs.10 crore. |
is more
than Rs. 2 crore but does not exceed Rs. 5 crore. |
Notification No. S.O.1722 (E) dated
October 5, 2006: In case of the above enterprises, investment in plant and
machinery is the original cost excluding land and building and the items
specified by the Ministry of Small Scale Industries.
In terms of Ministry of MSME, GoI, Office
Memorandum (OM) F. No. 12(4)/2017-SME dated March 8, 2017, it is clarified
that for ascertaining the investment in plant and machinery for classification
of an enterprise as Micro, Small and Medium, the following documents could be
relied upon:
(i) A copy of the invoice of the purchase of plant and machinery; or
(ii) Gross block for investment in plant and machinery as shown in the
audited accounts; or
(iii) A certificate issued by a Chartered Accountant regarding purchase
price of plant and machinery.
Further, the Ministry has clarified that for the investment in plant and
machinery for the purpose of classification of an enterprise as Micro, Small or
Medium, the purchase value of the plant and machinery is to be reckoned and not
the book value (purchase value minus depreciation).
Provisions relating to DELAYED PAYMENT
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 forty-five 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
three times of the bank rate notified by the Reserve Bank.
Section 17: Recovery of amount of due
For any goods supplied or services rendered by the
supplier, the buyer shall be liable to pay the amount with interest thereon as
provided under section 16.
Section 18: Reference to Micro and Small
Enterprises Facilitation Council
Notwithstanding anything contained in any other law for time being in
force, any party to a dispute may, with regard to any amount due under section
17, make a reference to the Micro and Small Enterprises Facilitation Council.
Every reference made under this section shall be decided within a period
of ninety days from the date of making such a reference.
MSME disclosure requirements in Annual statement of
accounts
Section 22: Requirement to specify
unpaid amount with interest in the annual statement of accounts.
Where any buyer is required to get his annual accounts audited under any
law for the time being in force, such buyer shall furnish the following
additional information in his annual statement of accounts, namely:—
– the principal amount and the interest due thereon (to be shown
separately) remaining unpaid to any supplier as at the end of each accounting
year;
– the amount of interest paid by the buyer in terms of section 16, along
with the amounts of the payment made to the supplier beyond the appointed day
during each accounting year;
– the amount of interest due and payable for the period of delay in
making payment (which have been paid but beyond the appointed day during the
year) but without adding the interest specified under this Act;
– the amount of interest accrued and remaining unpaid at the end of each
accounting year; and
– the amount of further interest remaining due and payable even in the
succeeding years, until such date when the interest dues as above are actually
paid to the small enterprise, for the purpose of dis allowance as a deductible
expenditure under section 23.
Dis-allowance under Income Tax Act, 1961
Section 23: Interest not to be
allowed as deduction from income
Notwithstanding anything contained in the Income-tax Act, 1961, the
amount of interest payable or paid by any buyer, under or in accordance with
the provisions of this Act, shall not, for the purposes of computation of
income under the Income-tax Act, 1961, be allowed as deduction.
Section 24: Overriding effect.
The provisions of sections 15 to 23 shall have effect notwithstanding
anything inconsistent therewith contained in any other law for the time being
in force.
Clarification regarding return to
be filed for MSME’s by all specified companies
Ministry of Corporate Affairs issued a recent notification dated 22nd January, 2019 in continuation of notification issued by Ministry
of Micro, Small and Medium Enterprises dated 2nd November, 2018 for filling of half yearly
return by specified companies.
Every Specified company shall file a return as per
MSME Form I annexed to this order, by 31st October for the period from
April to September and by 30th April for the period from
October to March.
“Specified Companies” All the Companies who get
supplies of goods or services from Micro or small enterprises and the payment
not made with-in 45 days from the date of acceptance or
the date of deemed acceptance of goods or services.
“Date of acceptance” means,
(a) the day of the actual delivery of goods or the rendering of
services; or
(b) where any objection is made in writing by the buyer regarding
acceptance of goods or services within fifteen days from the day of the
delivery of goods or the rendering of services, the day on which such objection
is removed by the supplier;
“Date of deemed acceptance” means, where no objection
is made in writing by the buyer regarding acceptance of goods or services
within fifteen days from the day of the delivery of goods or the rendering of
services, the day of the actual delivery of goods or the rendering of services;
For companies in addition to the disclosures mentioned in the schedule
III of the Companies Act, 2013, the following disclosures to be given in the
notes to the financial statements of company.
|
Sl. No |
Particulars |
As on |
|
|
March
31,2019 |
March
31, 2020 |
||
|
1 |
Principal
amount due to suppliers registered under the MSMED Act and remaining unpaid
as at year end |
||
|
2 |
Interest
due to
suppliers registered under the MSMED Act and remaining unpaid as at year end |
||
|
3 |
Principal
amounts paid to suppliers registered under the MSMED
Act, beyond the appointed day during the year |
||
|
4 |
Interest
paid, other
than under Section 16 of MSMED Act, to suppliers registered under the MSMED
Act, beyond the appointed day during the year |
||
|
5 |
Interest
paid, under
Section 16 of MSMED Act, to suppliers registered under the MSMED Act, beyond
the appointed day during the year |
||
|
6 |
Interest
due and payable towards suppliers registered under MSMED Act, for
payments already made |
||
|
7 |
Further interest
remaining due and payable for earlier years |
||
