Under the MSME act doing the late payment to the MSME vendors just affects the supply of the materials from the MSME vendors. This article consists of sections where it mentions the effects and consequences of doing the late payment Vendor under the MSME act.
The article discusses the issues and their effects of the late payments to MSME vendors within their reporting in the companies act and the MSME act 2006. Let us check complete details about all the provisions within the companies, MSME acts with the respective process.
Brief Summary About Provision of Companies Act, 2013
Under the MCA notification provided on 22nd Jan 2019, MCA pointed towards the companies, that receives the supplies of goods or services via micro and small companies and whose payments to the micro and small companies suppliers will be more than 45 days from the acceptance date or the date of deemed acceptance of the goods or services under the provision of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) (hereafter referred to as “Specified Companies”), shall submit a half-yearly return to the Ministry of Corporate Affairs in form MSME-1.
All Details of Provisions Under MSME Act, 2013
Section 15: In no case, the between the supplier and the buyer period agreed concerning for payment of the invoice is written shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
Section 16: In which any buyer is unable to do the payment for the amount to the supplier as needed beneath section 15 the buyer would notwithstanding anything place in any agreement amid the buyer and the supplier or in any law towards the imposition of the time is subjected to furnish the compound interest with monthly rests to the supplier upon the same amount from the designated day or whatever be the case might be from the date quickly follows the date mention on at 3 times of the bank rate circulated via RBI.
Read Also: Mandatory MCA Compliance Chart FY 2020-21 for Companies
Section 22: In which any buyer is needed to have his yearly accounts audited beneath any law towards the time being in force like a buyer will file the mentioned additional details in the yearly statement such as:
- The principal amount and the interest due thereon needed to be displayed individually left due to any supplier as in the finish of every accounting year.
- The amount of interest furnished through the buyer towards section 16 including the amount of the payment furnished to the supplier far away from the designated day for every accounting year.
- The amount of interest left and liable to pay towards the late payment which has been furnished but exceeding the designated day during the year except without adding the interest designated beneath this Act.
- The amount of interest accrued and left not paid during the finish of every accounting year.
- The amount of additional interest remains left and subjected to pay despite in the next years until the mentioned date when the interest is left because the above is truly furnished to the small companies towards the intention of disallowance as a deductible expenditure beneath section 23.
After-effects of Late Payment As Per Companies & MSME Act
Companies Act: When the company do payments to its MSME Vendor post to 45 days of acceptance of goods/services:
- E-form: An organization should furnish form MSME-1 every half year with Registrar of Companies stating all the transactions, wherever payment addressed after 45 days.
- Reporting in Financial Statement: The firm is needed to provide further information as mentioned in its financial statement:
- The principal amount and the interest due thereon
- The amount of interest furnished through the buyer as per section 16
- The amount of interest left and liable to pay towards the period in the furnishing of the late payment.
- The amount of interest accrued and the rest not paid during the finish of every accounting year.
- The amount of additional interest remaining due and subjected to pay despite in the next years.
Note: Under the MSME act 2006 if the organization does late payments to MSME vendors then they need to furnish bigger amounts of interest and report the defaults in their financial statements and the additional documents.
MSME Act: When the organization does payments to its MSME vendor post 45 days of acceptance of goods or services:
- Payment of Interest: The firms need to furnish the interest upon the late payment to MSME registered supplier. The Rate of interest will be 3 times the bank circulated through the Reserve Bank.
- Reporting in Financial Statement: The firms need to provide a number of new disclosures of default which is stated in the above section in their financial statement.
Note: There are various case laws in which the MSME vendors have furnished claims in a court of the law towards the late payment and the court order in their favour and tell the firms to furnish the principal amount as well as the interest concerned on the amount.
