MSME Form 1: Know the Procedure to File, Due Dates and Penalties

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in fostering economic growth and generating employment opportunities. To streamline and support the functioning of these enterprises, the Government of India has introduced various measures, including the requirement to file MSME Form 1. This article provides an overview of the procedure to file MSME Form 1, the due dates for filing, and the penalties for non-compliance.

Quick Look

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of any economy, contributing significantly to employment generation, economic growth, and innovation. Recognizing their importance, governments worldwide have implemented various policies and schemes to support and promote MSMEs. In India, the government has introduced MSME Form 1 as a powerful tool to empower and uplift these enterprises. Filing MSME Form 1 brings numerous benefits for MSMEs, ranging from financial assistance to enhanced market access.

What is MSME Form 1?

MSME Form 1 is a mandatory filing required under the MSMED Act, 2006. It is an online form that needs to be filled by entities falling under the definition of micro, small, or medium enterprises. This form captures key information about the enterprise, including its registration details, employment statistics, investment in plant and machinery or equipment, etc.

MSME Form 1 is a mandatory e-form that requires eligible entities to furnish information about their outstanding payments to micro or small suppliers. This form was introduced to promote timely payments and reduce the incidence of delayed payments faced by MSMEs.

Purpose of Filing MSME Form 1

MSME Form 1, also known as the Udyam Registration Form, is an online filing requirement introduced by the Ministry of Micro, Small and Medium Enterprises (MSME) in India. Its primary purpose is to facilitate the registration and recognition of enterprises under the MSMED Act, 2006. This act provides a legal framework for the promotion, development, and enhancement of competitiveness of micro, small, and medium enterprises.

The filing of MSME Form 1 is mandatory for all entities seeking to be classified as micro, small, or medium enterprises. By filing this form, businesses can obtain a unique identification number known as the Udyam Registration Number (URN). This URN is crucial for availing various benefits and incentives offered to MSMEs by the government, financial institutions, and other stakeholders.

The key purpose of filing MSME Form 1 can be summarized as follows:

• Registration and Recognition: Filing MSME Form 1 allows businesses to register themselves as micro, small, or medium enterprises and obtain a valid Udyam Registration Number. This recognition provides a legal identity to the enterprise and validates its existence as an MSME.
• Access to Government Schemes and Incentives: Having a valid Udyam Registration Number enables MSMEs to access a wide range of government schemes, subsidies, and incentives. These initiatives aim to support MSMEs in areas such as finance, credit, marketing, technology adoption, and skill development.
• Financial Benefits and Credit Facilitation: Banks and financial institutions often provide preferential treatment and financial benefits to MSMEs. Filing MSME Form 1 and obtaining the Udyam Registration Number simplifies the process of accessing credit, loans, and other financial facilities. It helps MSMEs establish their creditworthiness and enhances their chances of obtaining favorable terms from lenders.
• Ease of Doing Business: The Udyam Registration process is entirely online, making it convenient and user-friendly for entrepreneurs. It eliminates the need for lengthy paperwork and physical visits to government offices. By simplifying the registration process, MSMEs can focus more on their core business activities, thereby promoting ease of doing business.
• Protection of Interest: Filing MSME Form 1 ensures that MSMEs receive the benefits and protection provided under the MSMED Act, 2006. This includes timely payments for the goods or services rendered, resolution of disputes through specialized mechanisms, and safeguards against delayed payments from buyers or clients.

Importance of MSME Form 1

The importance of MSME Form 1 lies in its potential to bring several benefits to MSMEs and the overall economy:

• Simplified Registration Process: The earlier UAM filing process was often perceived as cumbersome and time-consuming. MSME Form 1, with its streamlined format, makes the registration process hassle-free and efficient. It eliminates the need for unnecessary paperwork and reduces the time taken to complete the registration formalities.
• Access to Government Schemes and Benefits: MSMEs registered under MSME Form 1 become eligible for various government schemes and incentives. These schemes aim to provide financial assistance, marketing support, and technological upgradation to MSMEs. By registering through MSME Form 1, enterprises can unlock the benefits offered by the government and avail themselves of the necessary support to enhance their productivity and competitiveness.
• Credibility and Market Opportunities: MSME Form 1 registration provides a formal recognition to the enterprise, establishing its credibility and authenticity. This registration certificate acts as proof of being a genuine MSME, which can enhance the enterprise’s reputation and open doors to new market opportunities. It instills confidence in stakeholders, including customers, suppliers, and financial institutions, facilitating better business relationships and access to credit facilities.
• Data-Driven Policymaking and Support: MSME Form 1 registration helps in creating a comprehensive database of MSMEs across the country. This data can be analyzed to gain insights into the sector’s performance, challenges, and growth potential. The government can then formulate targeted policies and interventions to address the specific needs of MSMEs, fostering an enabling environment for their growth. Moreover, this database can facilitate sector-specific research, planning, and resource allocation, ensuring better utilization of resources and promoting sustainable development.
• Ease of Compliance and Access to Finance: MSME Form 1 registration brings MSMEs under the formal sector, ensuring compliance with regulatory requirements. This promotes transparency, accountability, and good governance practices within the enterprise. It also enables easier access to financial services, including loans, credit facilities, and financial aid, as registered MSMEs are viewed as less risky by lending institutions.
• Integration with Digital Platforms: MSME Form 1 registration aligns with the government’s digitalization initiatives, such as the Digital India campaign. It enables MSMEs to leverage digital platforms, online marketplaces, and e-commerce channels to expand their reach and access new markets. With the growing digital ecosystem in India, MSMEs can capitalize on the opportunities presented by e-commerce and digital platforms to boost their sales, scale their operations, and compete effectively in the market.

Benefits of filing MSME Form 1

Filing MSME Form 1 brings numerous benefits for MSMEs, ranging from financial assistance to enhanced market access. Let’s explore some of the key advantages of filing MSME Form 1.

• Registration and Recognition: By filing MSME Form 1, an enterprise obtains official recognition as an MSME. This registration lends credibility to the business and facilitates access to a wide range of benefits and support mechanisms provided by the government. It acts as proof of the enterprise’s existence and helps establish its identity in the market.
• Access to Financial Assistance: MSMEs often face challenges in securing affordable credit and financial assistance. However, filing MSME Form 1 opens up avenues for such support. The government and financial institutions offer various schemes and programs specifically designed for MSMEs, including low-interest loans, subsidies, and grants. Having MSME registration increases the likelihood of obtaining these financial benefits, which can fuel business growth and expansion.
• Priority in Government Tenders: Many government departments and agencies issue tenders for procuring goods and services. With MSME registration, enterprises gain priority in such tenders. The government reserves a certain percentage of contracts for MSMEs, giving them a competitive edge. This preferential treatment can lead to new business opportunities and increased revenue for MSMEs.
• Statutory Benefits: Filing MSME Form 1 also entitles enterprises to various statutory benefits provided by the government. These benefits include protection against delayed payments, wherein the buyer is required to make payment within a specified timeframe. Non-compliance can result in interest payments by the buyer to the MSME. Additionally, MSMEs may receive assistance for the resolution of disputes through specialized forums such as the Micro and Small Enterprises Facilitation Council.
• Technology and Skill Upgradation: MSMEs often face challenges in adopting new technologies and upgrading their skills due to limited resources. However, MSME registration can provide access to government initiatives and programs aimed at promoting technology adoption and skill development. These programs may include subsidized training, workshops, and capacity-building initiatives to enhance competitiveness and productivity.
• Market Access and Networking Opportunities: MSME registration opens doors to enhanced market access and networking opportunities. The government promotes MSMEs through various exhibitions, trade fairs, and business conclaves where registered enterprises can showcase their products and services. This exposure can lead to collaborations, partnerships, and access to a broader customer base, both domestically and internationally.
• Tax Benefits: MSMEs often face a significant burden of taxes and compliance costs. However, by filing MSME Form 1, enterprises can avail themselves of various tax benefits and exemptions. These may include reduced rates of taxation, tax rebates, and exemptions under specific government schemes. Such benefits can help MSMEs optimize their costs and improve their financial viability.
• Ease of Doing Business: MSME registration simplifies several administrative and regulatory processes, making it easier to do business. For instance, it streamlines compliance with labor laws, environmental regulations, and other legal requirements. This reduced bureaucratic burden enables MSMEs to focus more on their core activities, innovation, and growth.

Details to be Reported in Form MSME-1

The following information must be disclosed on Form MSME-1:

• The company’s CIN and PAN
• Company name, address, and e-mail
• Suppliers’ names and PAN numbers
• Amount owed for the provision of goods or services
• The day on which the payment is due
• The reason for the delay in payment of the required amount

Procedure of Filling MSME Form 1: A Step-by-Step Guide

Under Udyam Registration, business owners are required to fill MSME Form 1 to register their enterprises as MSMEs.  A step-by-step guide on the procedure of filling MSME Form 1 is as follows:

• Step 1: Visit the Udyam Registration Portal: To begin the process, visit the official Udyam Registration portal. The portal can be accessed at https://udyamregistration.gov.in.  Make sure you have a stable internet connection and a compatible web browser.

• Step 2: Click on the “For New Entrepreneurs who are not Registered yet as MSME” button: On the Udyam Registration portal, you will find a section titled “For New Entrepreneurs who are not Registered yet as MSME.” Under this section, click on the “For New Registration” button to proceed with the registration process.

• Step 3: Enter your Aadhaar Number: The next step requires you to enter your Aadhaar number in the provided field. Make sure to double-check the accuracy of the number before proceeding. It’s worth noting that a single Aadhaar number can only be used to register one enterprise. If you have already registered a business using your Aadhaar number, you will not be able to proceed further.

• Step 4: Verify Aadhaar Number: After entering your Aadhaar number, click on the “Validate & Generate OTP” button. An OTP (One-Time Password) will be sent to the mobile number linked to your Aadhaar. Enter the OTP in the designated field and click on the “Validate OTP” button.

• Step 5: Fill in the Enterprise Details: Once your Aadhaar number is verified, you will be redirected to the MSME Form 1. Here, you need to provide various details about your enterprise. This includes the name of the enterprise, type of organization, PAN (Permanent Account Number), location, official address, bank account details, and the activities undertaken by your enterprise.

• Step 6: Select the Appropriate Classification: In this step, you must choose the appropriate classification for your enterprise. The classification is based on the investment in plant and machinery or equipment for manufacturing enterprises, and investment in equipment for service enterprises. Make sure to select the correct classification as it determines the eligibility and benefits available to your enterprise.

• Step 7: Upload Supporting Documents: After entering all the required details, you need to upload the necessary supporting documents. The documents may include your PAN card, address proof, and other relevant certificates. Make sure the documents are scanned or in digital format and meet the specified size and format requirements.

• Step 8: Self-Declaration and Submitting the Form: Before submitting the form, you will be required to provide a self-declaration stating the accuracy of the information provided. Carefully read the declaration, tick the checkbox to accept the terms, and then click on the “Submit” button to complete the registration process.

• Step 9: Generation of Udyam Registration Number: Once you submit the form successfully, an acknowledgment containing your Udyam Registration Number will be generated. This number serves as a unique identification for your enterprise as an MSME. You can download and save the acknowledgment for future reference.

Penalties for Non-Compliance

Failure to file MSME Form 1 within the prescribed timelines can attract penalties as per the provisions of the MSMED Act. The penalties may vary based on the duration of non-compliance. The following penalties may be applicable:

• Delayed Filing: A penalty of INR 1,000 may be imposed for every day of delay beyond the due date.
• Incorrect Information: If the information provided in MSME Form 1 is found to be incorrect or false, the enterprise may face legal consequences, including prosecution.
• Suspension or Cancellation of Registration: Non-compliance with the filing requirements may result in the suspension or cancellation of the Udyam Registration.

Form MSME-1 filing Deadline

MSME-1 is a Semi-Annual return that the designated companies must file with the MCA. The following are the deadlines for submitting Form MSME-1:

Conclusion

In conclusion, filing MSME Form 1 is an essential step for businesses looking to be recognized and classified as micro, small, or medium enterprises in India. It offers numerous advantages, including access to government schemes, financial benefits, and protection under the law. MSMEs should comply with this requirement to unlock the full potential of opportunities available to them and contribute to the overall growth and development of the sector.

Connect with our Experts at Legal Window, in case you need any assistance in Filing of MSME Form 1, our experts would guide you through all the compliances regarding it.