Brief Overview
In addition to being required by law under the Companies Act, filing the MSME-1 form has significant ramifications under the Income Tax Act. It also impacts the company's statutory auditor, making it an essential ROC compliance need for companies.
As a statutory auditor preparing financial statements, you must provide a detailed report that includes information about payment delays to suppliers who are MSME (Micro, Small, and Medium Enterprises). The report should also include clauses pertaining to loans taken out. This information is vital because it promotes financial reporting accountability and transparency, which are essential to the survival and growth of any business.
If a Company Secretary is in charge of attesting to the MGT-7 of a company, it is imperative that any instances of incomplete or inaccurate MSME-1 filing be noted as non-compliance in the MGT-7. By doing this, the Company is guaranteed to be aware of any possible breaches and to take the appropriate action to rectify the problem.
Informative
All companies must file a return using MSME Form I in accordance with the requirements set out by the Companies Act, 2013, and the Specified Companies Order of 2019. According to paragraph 3 of the Specified Companies Order and Section 405(1) of the Companies Act, this filing is required in order to disclose payments made to Micro and Small Enterprise Suppliers.
By October 31st for the April through September period, and
The relevant information must be submitted by April 30th. This data should apply to the month of October through the month of March.
A corporation will be subject to a penalty under Section 405(4): if they do not comply with Section 405(1). Such non-compliance carries a penalty of INR 20,000, and there is an additional INR 20,000 penalty for each culpable officer. Furthermore, in the event that the corporation continues to fail to comply, it will be fined INR 1,000 per day of non-compliance, up to a maximum of INR 300,000. Companies must make sure they comply with Section 405(1) in order to avoid fines and legal repercussions.
Samsung R&D Institute-India-Bangalore Private Limited Judgement Order
Background of the Case
In accordance with the laws, the business must file the MSME-1 form by October 31, 2022, at the latest, for the months of April 2022 through September 2022. Similarly, the company needs to file the same form with the Registrar of Companies (ROC) by April 30, 2023, for the period of October 2022 to March 2023.
The company's two MSME-1 filings, one stretching for 266 days and the other for 85 days, were in default as of July 25, 2023.
Penalties for violating section 405 will be calculated across two different time periods. November 1, 2022–July 25, 2023 is the first term, and May 01, 2023–July 25, 2023 is the second, respectively. These time frames apply to submitted returns that were filed after the deadline.
Consideration of Factors
Having thoroughly examined all relevant case-related facts and circumstances and appropriately taken into account the above-mentioned relevant elements, I have decided to impose the necessary sentence.
First Default: November 01, 2022, to July 25, 2023 - Delay of 266 Days
Second Default: 85-Day Delay from May 1, 2023 to July 25, 2023
Final Choice
The necessity of filing MSME Form I on time is underscored by the Registrar of Companies (ROC) recent enforcement action in Karnataka against companies that violate Section 405(1) of the Companies Act. This preemptive action confirms the country's unwavering commitment to making sure all businesses follow the Act's requirements. The ROC's programmes stress the need for regulatory compliance and send a strong message to businesses who don't comply that there will be repercussions.
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