UNDERSTANDING MSMES: COMPLIANCE REQUIREMENTS AND SPECIFIED COMPANIES IN INDIA

 

Micro, Small and Medium Enterprises (MSMEs) are an integral part of the Indian economy, contributing significantly to employment generation, innovation, and economic growth. The Government of India defines MSMEs based on their investment in plant and machinery or equipment. These enterprises are classified into Micro, Small, and Medium Enterprises, with investment limits up to Rs. 1 crore, Rs. 10 crores, and Rs. 50 crores, respectively. MSMEs play a vital role in the development of the country, especially in rural areas, by creating employment opportunities and promoting entrepreneurship. The government has launched various schemes and initiatives to support the growth of MSMEs, such as the Atmanirbhar Bharat Abhiyan, Make in India, and the Pradhan Mantri Mudra Yojana. Compliance with statutory and regulatory requirements is essential for MSMEs to ensure their long-term sustainability and success.

MSMEs are vital for economic growth in many countries, including India, contributing significantly to employment and exports. The government has launched initiatives to support MSMEs, and compliance is essential for their efficient operation. In this article, we will explore MSME compliances in detail.

 

Difference Between Small And Medium Enterprise

 

In India, Micro, Small and Medium Enterprises (MSMEs) are classified based on their investment in plant and machinery or equipment. Micro Enterprises are those with an investment of up to Rs. 1 crore, while Small Enterprises have an investment of up to Rs. 10 crore.

 

What are Specified companies?

 

Specified companies are those that are required to disclose their outstanding payments to MSMEs. As per the notification issued by the Ministry of Corporate Affairs (MCA), companies with outstanding payments to MSMEs beyond 45 days from the date of acceptance or the deemed date of acceptance of goods or services are required to furnish details of such outstanding payments to MSMEs in their annual financial statements.

 

Compliances for MSME:

 

MSMEs are required to comply with various statutory and regulatory requirements, such as obtaining necessary licenses, registrations, and approvals, complying with labor laws, filing of tax returns, maintaining proper books of accounts, etc.

 

What is the Return Periodicity of MSME Form 1?

 

MSME Form 1 is to be filed twice a year, for the period April to September and October to March to the Registrar concerning the outstanding payments to the Micro, small and medium enterprises which contain the following information: the amount of payment due; the reasons for the delay.

 

Issues MSMEs must tackle to ensure compliances:

 

Some of the common issues faced by MSMEs while ensuring compliances include lack of awareness of statutory requirements, resource constraints, and difficulty in keeping up with frequent changes in regulations.

 

What are the responsibilities of the Specified Companies after the MSME Registration?

 

Specified companies are required to make payment to MSMEs within 45 days of the acceptance or deemed acceptance of goods or services. They are also required to disclose details of their outstanding payments to MSMEs in their annual financial statements

 

What is the Due Date of MSME Form 1?

 

The due date for filing MSME Form 1 is 30 days from the end of the half-year period for which the return is being filed.

 

Extension Of The Due Date

 

The Ministry Of Corporate Affairs on February 21st 2019 state that the date of filing the MSME Form 1 will be calculated from the time the form is deployed on the MCA 21 Portal.

 

Period of Return:	Date of Filing
April to September	31st October
October to March	30th April

 

What Is The Penalty For Not Complying With These Standards?

Following are the penalties for not complying with these standards:

- There will be a fine of INR 25000 with the Defaulter Company.

- The concerned officer of the company will be liable for imprisonment up to six months, or there will be a fine from INR 25000 to INR 3, 00,000.

 

Conclusion:

MSMEs are an important sector of the Indian economy and play a crucial role in generating employment and promoting entrepreneurship. Compliance with statutory and regulatory requirements is essential for their growth and success, and MSMEs must ensure that they comply with all relevant requirements to avoid legal consequences and promote their long-term sustainability.

 

Article Compiled by:-

Mayank Garg

(LegalMantra.net Team)

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.

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