MSME Form 1, officially known as e-Form MSME-1, is a mandatory half-yearly compliance return that certain companies must file with the Registrar of Companies (ROC) to disclose outstanding payments due to Micro and Small Enterprises (MSEs) where the payment delay exceeds 45 days from the date of acceptance or deemed acceptance of goods or services. The form was introduced in 2019 under Section 405 of the Companies Act, 2013, to improve payment discipline and enhance transparency in dealings with MSME suppliers.
Following the migration to the MCA V3 portal and the introduction of the Companies (Furnishing of Information about Payment to Micro and Small Enterprise Suppliers) Amendment Order, 2024, effective from July 2024, the reporting requirements under MSME Form 1 have become more comprehensive and are subject to increased regulatory scrutiny. As a result, the form has emerged as an important compliance obligation for finance, accounts and legal teams across India.
This guide explains what MSME Form 1 is, which companies are required to file it, the key changes introduced under the July 2024 amendments, the significance of the 45-day payment rule and its linkage with Section 43B(h) of the Income Tax Act, the information required in the revised form, applicable due dates, the step-by-step filing procedure, penalties for non-compliance, and common errors that companies should avoid.
MSME form 1 - key highlights
| Particulars | Details |
|---|---|
| Form name | e-Form MSME-1 (half-yearly return) |
| Filed with | Registrar of Companies (ROC) through the MCA V3 portal |
| Legal basis | Section 405 of the Companies Act, 2013, read with the Specified Companies (Furnishing of Information about Payment to Micro and Small Enterprise Suppliers) Order, 2019, as amended in July 2024 |
| Applicability | Every company, including public companies, private companies and One Person Companies (OPCs), that has payments outstanding to Micro and Small Enterprise (MSE) suppliers for more than 45 days during the relevant half-year |
| Exclusions | Limited Liability Partnerships (LLPs), sole proprietorships, partnership firms, and companies that have no payments outstanding beyond 45 days. A nil return is not required where there are no reportable delays |
| Reporting requirement (post-July 2024) | Covers any payment due to an MSE supplier that remained outstanding beyond 45 days at any time during the reporting period, even if the payment was subsequently settled |
| Due date for April–September period | 31 October |
| Due date for October–March period | 30 April |
| Penalty for non-compliance | An initial penalty of Rs. 20,000, along with a continuing penalty of Rs. 1,000 per day of default, subject to a maximum of Rs. 3 lakh, under Section 405(4) of the Companies Act, 2013 |
| Interest on delayed payments | Compound interest at three times the RBI bank rate, payable in accordance with Section 16 of the MSMED Act, 2006 |
| Income tax implications of delayed payments | Deductions for payments outstanding beyond the prescribed period may be disallowed under Section 43B(h) of the Income Tax Act. The benefit available under the first proviso to Section 43B is not applicable in such cases |
What is MSME form 1?
MSME Form 1 is a statutory half-yearly reporting requirement applicable to specified companies that purchase goods or services from Micro and Small Enterprise (MSE) suppliers and have payments outstanding to such suppliers for more than 45 days from the date of acceptance or deemed acceptance. The form is filed with the Registrar of Companies (ROC) in accordance with the Specified Companies (Furnishing of Information About Payment to Micro and Small Enterprise Suppliers) Order, 2019, as amended by the Amendment Order, 2024.
The primary objective of MSME Form 1 is to provide the Ministry of Corporate Affairs (MCA) with greater visibility into delayed payments owed to MSE suppliers. Payment delays have long been a significant challenge for small businesses, affecting their liquidity and day-to-day operations. By requiring companies to disclose such delays, the government seeks to improve payment discipline, enhance transparency and strengthen the financial position of MSMEs. When combined with the income tax implications under Section 43B(h) of the Income Tax Act, the reporting requirement creates a strong incentive for companies to settle dues within the prescribed timeframe.
Important: MSME Form 1 applies only to suppliers classified as Micro Enterprises or Small Enterprises under the MSME framework. It does not apply to Medium Enterprises. Companies should obtain and review the supplier's Udyam Registration Certificate to verify the enterprise category before determining their reporting obligations. Suppliers classified as Medium Enterprises are outside the scope of MSME Form 1 reporting.
Who should file form MSME-1?
Every company — public, private, one-person (OPC) — that meets both conditions below must file:
- The company has procured goods or services from one or more suppliers registered as Micro or Small Enterprises under the MSMED Act 2006.
- A payment to any such supplier remained unpaid for more than 45 days from the date of acceptance (or deemed acceptance) of those goods or services, at any point during the reporting half-year.
Limited liability partnerships (LLPs), sole proprietorships, Hindu Undivided Families (HUFs) and partnership firms are NOT required to file MSME Form 1. This obligation falls only on companies under the Companies Act, 2013.
Purpose of filing form MSME-1
Any company that has purchased goods or availed services from a Micro or Small Enterprise (MSE) supplier and has an outstanding payment exceeding 45 days is required to report such dues to the Registrar of Companies (ROC) by filing MSME Form 1.
The key objectives of MSME Form 1 are:
- To monitor companies that have outstanding payments due to Micro and Small Enterprise suppliers.
- To identify and track MSE suppliers awaiting payment for goods supplied or services rendered.
- To promote timely settlement of dues and improve payment discipline among companies.
- To support the financial stability of Micro and Small Enterprises by reducing delays in the receipt of payments.
- To enhance transparency and regulatory oversight in commercial transactions involving MSE suppliers.
- To help safeguard small businesses from cash-flow constraints and financial hardship caused by prolonged payment delays.
Due date for filing form MSME-1
| Half-year period | Due date | Filing period example (FY 2025-26) |
|---|---|---|
| April to September | 31 October | 31 October 2025 (for Apr–Sep 2025) |
| October to March | 30 April | 30 April 2026 (for Oct 2025–Mar 2026) |
There is no provision for extension or condonation of delay as a matter of right. Companies must ensure their MSME vendor data — Udyam Registration Numbers, payment histories, outstanding amounts — is ready well in advance of these dates.
Details to be reported in form MSME-1
When filing Form MSME-1, companies are required to report comprehensive details regarding outstanding payments to micro and small enterprises. The form is designed to capture specific information that ensures transparency and accountability in business transactions. The details to be reported include:
- Name of the supplier: The name of the micro or small enterprise to whom the payment is due.
- PAN and GSTIN of the supplier: The Permanent Account Number (PAN) and Goods and Services Tax Identification Number (GSTIN) of the supplier, ensuring proper identification.
- Date from which the amount is due: The exact date from which the payment has been outstanding, highlighting the duration of the delay.
- Total amount due: The total amount that is due to the supplier, including the principal amount and any interest accrued due to delayed payments.
- Reasons for the delay: A detailed explanation for the delay in making the payment, providing context and justification for the delay.
- Declaration of compliance: A declaration by the company confirming that the details provided are accurate and that the company is in compliance with the MSMED Act.
These details are crucial for monitoring and enforcing timely payments to MSMEs. Accurate reporting ensures that companies are held accountable for their payment practices, and any discrepancies can be promptly addressed by regulatory authorities. The requirement to provide detailed information also acts as a deterrent against non-compliance, as companies are aware that their payment practices are subject to scrutiny.
How to file MSME Form 1
| Step | Action |
|---|---|
| 1. Identify MSE suppliers | Prepare a list of all suppliers holding a valid Udyam Registration Certificate. Verify that each supplier is classified as a Micro Enterprise or Small Enterprise, as Medium Enterprises are not covered under MSME Form 1 reporting requirements. |
| 2. Review payment records | Examine all transactions with MSE suppliers during the relevant half-year. Identify cases where payment remained outstanding for more than 45 days from the date of acceptance or deemed acceptance of goods or services. |
| 3. Assess filing requirements | Determine whether the company is required to file MSME Form 1. If no payment to any MSE supplier exceeded the 45-day limit during the reporting period, filing is not required. If any payment crossed the 45-day threshold, the form must be filed, even if the amount was subsequently paid. |
| 4. Compile the required information | Gather all relevant details for each reportable supplier, including the Udyam Registration Number (URN), PAN, invoice details, outstanding amount, payment dates and the reasons for the delay in payment. |
| 5. Access the MCA V3 portal | Visit the MCA portal, log in using the company's credentials and navigate to the MSME Form 1 filing section under the e-Forms menu. |
| 6. Complete the form | Enter the company's details and provide the required information for each reportable MSE supplier. Attach any supporting documents or schedules, where applicable. |
| 7. Apply the digital signature | The form must be digitally signed by the authorised signatory, such as a Director, Company Secretary or Chief Financial Officer, using a valid Digital Signature Certificate (DSC) registered with the MCA. |
| 8. Submit the form and retain the acknowledgement | Submit the completed form through the MCA V3 portal and download the acknowledgement receipt and Service Request Number (SRN) for future reference and record-keeping. |
What is the MSME 45-day payment rule?
The MSME 45 days payment rule is a provision under the MSMED Act, 2006, mandating that payments to micro and small enterprises be made within 45 days from the date of acceptance or deemed acceptance of goods or services.
- Applicability: The rule applies to all companies that procure goods or services from micro and small enterprises, ensuring timely payments to these businesses.
- Acceptance of goods or services: The date of acceptance is the date when the buyer acknowledges receipt of goods or services in accordance with the terms of the contract.
- Deemed acceptance: If the buyer does not raise any objections within 15 days of delivery, the goods or services are considered accepted.
- Interest on delayed payments: If payments exceed the 45-day period, the buyer is liable to pay interest on the outstanding amount. The interest rate is three times the bank rate notified by the Reserve Bank of India.
- Reporting requirements: Companies must report details of outstanding payments exceeding 45 days in Form MSME-1, filed bi-annually.
- Penalties for non-compliance: Failure to comply with the 45 days payment rule or the reporting requirements can result in penalties for the company and its officers.
- Purpose: The rule aims to protect MSMEs from financial stress due to delayed payments, ensuring a stable cash flow and fostering a fair business environment.
By adhering to the MSME 45 days payment rule, companies can avoid penalties, maintain good business relationships, and contribute to the financial health of MSMEs. This compliance is crucial for the overall sustainability of the business ecosystem.
Penalties for non-compliance
| Non-compliance | Consequence | Governing provision |
|---|---|---|
| Failure to file MSME Form 1 or submission of incorrect information | An initial penalty of Rs. 20,000 may be imposed on the company and every officer responsible for the default, along with an additional penalty of Rs. 1,000 per day for continuing non-compliance, subject to a maximum penalty of Rs. 3 lakh. | Section 405(4), Companies Act, 2013 |
| Delay in payment to a Micro or Small Enterprise supplier beyond the prescribed period | Compound interest at three times the RBI bank rate becomes payable. This liability is mandatory and applies irrespective of whether the supplier formally demands the interest. | Section 16, MSMED Act, 2006 |
| Delay in payment to an MSE supplier resulting in income tax implications | The related expenditure may be disallowed as a tax deduction in the year in which it accrues. The deduction becomes available only in the year in which the payment is actually made. The relief available under the first proviso to Section 43B does not apply. | Section 43B(h), Income Tax Act, 1961 |
| Incorrect reporting in Form 3CD (Tax Audit Report) | The tax authorities may recompute the taxpayer's income and tax liability, potentially leading to additional tax demands, notices or scrutiny proceedings. | Income Tax Act, 1961 and applicable Tax Audit Rules |
Common mistakes to avoid
| Mistake | Why it matters | What to do instead |
|---|---|---|
| Relying on V2 logic (outstanding at period-end) | V3 captures any breach during the period — clearing dues on 30 September or 31 March no longer avoids reporting | Track payment histories throughout the half-year, not just at the cut-off date |
| Filing nil returns when none are due | Post-V3, nil returns are not required (and were creating unnecessary workload) | File only if any payment crossed 45 days; document the determination for audit trail |
| Reporting Medium enterprises | Medium enterprise suppliers are outside the MSME Form 1 scope | Verify Udyam Registration Certificate; report only Micro and Small suppliers |
| Not collecting Udyam Registration Numbers from suppliers | URN is a mandatory field in the V3 form; filing is incomplete without it | Make URN collection part of vendor onboarding |
| Missing the 43B(h) disallowance in ITR / Tax Audit | CPC will recompute liability; interest and penalties may follow | Share MSME payment data with the tax audit team before Form 3CD is finalised |
| Assuming only large companies must file | MSME Form 1 applies to every company — public, private, OPC — regardless of size | All companies with MSE suppliers must assess their filing obligation each half-year |
Conclusion
In conclusion, MSMEs play a pivotal role in the economic landscape, and timely payments to these enterprises are critical for their sustainability and growth. The MSME 45 days payment rule, enforced through the filing of Form MSME-1, ensures transparency and accountability in business transactions. Companies must adhere to the due dates and accurately report outstanding dues to avoid penalties and foster a healthy business environment. Compliance with these regulations not only supports the financial health of MSMEs but also promotes a fair and equitable business ecosystem. For companies, maintaining good payment practices is essential for building trust and credibility, which can also positively impact their access to business loans and other financial support.
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