Form MSME-1 Filing —
Half-Yearly Return
Complete Guide 2025
Form MSME-1 is a mandatory half-yearly return filed by "specified companies" reporting outstanding payments to Micro & Small Enterprise (MSE) suppliers delayed beyond 45 days. Due: 30 April & 31 October every year. The July 2024 MCA V3 update significantly expanded the scope — even payments settled late (but before half-year end) must now be reported. TAXAJ's CS team handles the complete filing.
Form MSME-1 — Half-Yearly Return for Outstanding MSME Payments
Form MSME-1 (also written as Form MSME-I or e-Form MSME 1) is a mandatory half-yearly return that "specified companies" must file with the Registrar of Companies (ROC) under 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 (MCA Order dated 22 January 2019). It requires companies to report outstanding payments to Micro and Small Enterprise (MSE) suppliers that have been delayed beyond 45 days from the date of acceptance or deemed acceptance of goods or services.
The MCA introduced this filing to address a critical problem: a 2023 MCA report revealed that over ₹10,000 crore in payments to MSME suppliers were being delayed beyond the 45-day credit period. These delayed payments strangle MSME cash flows and force them into high-cost borrowing. MSME-1 creates regulatory visibility and accountability — companies that delay payments must disclose it to the ROC, creating public records that can be reviewed by banks, investors, and regulators.
The 45-Day Payment Rule — MSMED Act, 2006
The 45-day rule originates from Section 9 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006:
- With written agreement: Payment must be made within the agreed period, but this period cannot exceed 45 days from the date of acceptance of goods/services
- Without written agreement: Payment must be made within 15 days from the date of acceptance (or deemed acceptance)
- Deemed Acceptance: If goods/services are not rejected within 15 days of delivery, they are deemed accepted on the day of delivery
- The 45-day clock starts from the date of acceptance (or deemed acceptance) — not from the invoice date
Why "Micro and Small" Only — Not Medium?
This is the most common compliance mistake. Form MSME-1 covers only Micro and Small enterprises — Medium enterprises are explicitly excluded. Many companies incorrectly include Medium enterprise vendors in their MSME-1 filing. The correct approach is to obtain Udyam Registration certificates from all suppliers and check the enterprise category — file MSME-1 only when Micro or Small enterprise suppliers have been paid beyond 45 days. Medium enterprises have separate protection under MSMED Act but not through MSME-1.
What Is "Nil Return" for MSME-1?
Unlike some other MCA returns, companies are NOT required to file a Nil MSME-1 Return when there are no outstanding payments or delayed payments to Micro or Small enterprise suppliers during the half year. However, post the July 2024 V3 update, this requires careful review — if even a single payment to any Micro or Small enterprise supplier was settled after 45 days during the half year (even if fully paid before half-year end), the company must now file MSME-1 and report all transactions with that supplier.
Old (V2) vs New (V3) MSME-1 Form — What Changed in July 2024?
This is the most critical and least-covered change in the MSME-1 compliance landscape. Most companies and even their advisors are unaware of the expanded scope.
Old Form — MCA V2 Portal (Pre-July 2024)
- Only report payments outstanding as on last day of half year for 45+ days
- If all MSME dues cleared before Sep 30 (or Mar 31) — NO filing required
- Example: Invoice accepted Apr 1, paid Jul 20 (110 days late) — if paid before Sep 30, no MSME-1 needed for H1
- Many companies intentionally cleared dues just before half-year end to avoid filing
- Did not capture interim payment delays — MCA had no visibility into mid-period defaults
New Form — MCA V3 Portal (Post-July 2024)
- Report all payments to MSE suppliers where 45-day limit was breached — whether still outstanding or already settled
- Additional fields: amount paid within 45 days, amount paid after 45 days, amounts outstanding ≤45 days and >45 days
- Example: Same scenario above — invoice accepted Apr 1, paid Jul 20 — MUST now file MSME-1 for H1
- Companies cannot "clear dues before Sep 30" to escape filing obligation
- If ANY MSE supplier had even one payment delayed beyond 45 days — ALL transactions with that supplier must be reported
MSME Thresholds (April 2025 Revised) — Micro, Small & Medium
MSME-1 covers only Micro and Small enterprises. Medium enterprises are excluded. The April 2025 revision raised Micro enterprise thresholds — more suppliers may now qualify as Micro.
| Enterprise Category | Investment in Plant & Machinery / Equipment | Annual Turnover | MSME-1 Coverage | Section 43B(h) Applies? |
|---|---|---|---|---|
| Revised MSME Thresholds — Effective April 2025 | ||||
| Micro Enterprise | ≤ ₹2.5 Crore | ≤ ₹10 Crore | YES — Must Report | YES |
| Small Enterprise | ≤ ₹25 Crore | ≤ ₹100 Crore | YES — Must Report | YES |
| Medium Enterprise | ≤ ₹125 Crore | ≤ ₹500 Crore | NO — Excluded | NO |
| How to Verify Supplier's MSME Status | ||||
| Check supplier's Udyam Registration Certificate | Visit udyamregistration.gov.in → Verify Udyam Number | |||
| Udyam Certificate shows enterprise category | Confirm it says "Micro Enterprise" or "Small Enterprise" — not Medium | |||
| Collect and preserve Udyam certificates | Maintain for all vendors annually — thresholds and certificates can change year to year | |||
MSME-1 Half-Yearly Deadlines — Which Period Applies to You?
MSME-1 is filed twice every year. Select the half-year period to see exact deadlines, reporting scope, and what happens if you miss it.
Half Year 1 — April 1 to September 30
What to Report in H1 — Apr to Sep
Half Year 2 — October 1 to March 31
What to Report in H2 — Oct to Mar
How to File Form MSME-1 — Complete Process
TAXAJ prepares the MSME-1 from your vendor payment data and files it on the MCA V3 portal. You provide the vendor ageing report and Udyam certificates — we handle the rest.
Identify All Micro & Small Enterprise Suppliers
Extract the complete vendor list from your accounting system. For each vendor, obtain their Udyam Registration Number (URN) and verify their category (Micro / Small / Medium) on the official Udyam portal at udyamregistration.gov.in. Only include suppliers with Udyam registration showing "Micro Enterprise" or "Small Enterprise" status. Medium enterprises must be excluded. Preserve a copy of each supplier's Udyam certificate for your records — this is your proof of due diligence in case of ROC inquiry.
Pull Payment Ageing Report — Filtered for MSE Vendors
From your accounting software (Tally, Zoho Books, Busy, SAP), generate an invoice-wise payment ageing report for the half-year period, filtered to Micro and Small enterprise suppliers only. For each invoice, you need: invoice number, invoice date, date of acceptance/deemed acceptance, date of actual payment, amount, and whether any balance is still outstanding. Calculate the payment delay: Payment Date − Acceptance Date. Flag all invoices where this exceeds 45 days — whether the amount is still outstanding or was already paid after the delay.
Prepare the MSME-1 Data Sheet
Organise data supplier-wise in the format required by MCA V3 Form MSME-1. For each Micro/Small enterprise supplier with any 45-day+ delay during the half year, compile: (a) supplier name and Udyam number, (b) amount paid within 45 days, (c) amount paid after 45 days, (d) amount outstanding for ≤45 days as on the half-year end, (e) amount outstanding for >45 days as on the half-year end, (f) reason for delay for each outstanding or late payment. TReDS payments (if any) must be separately categorised.
Board Resolution (Optional but Recommended)
While not explicitly mandatory, TAXAJ recommends passing a Board resolution acknowledging the MSME-1 filing obligation and authorising a Director to file the form. This creates a paper trail showing the Board was aware of outstanding MSME dues and took steps to report them — important protection against personal liability claims. The resolution should note the half-year period, the total amount outstanding, the suppliers involved, and the reasons for delay where applicable.
File on MCA V3 Portal — Form MSME-1
File the form on the MCA V3 portal using the Director's DSC. Navigate to: MCA Services → e-Forms → MCA e-Forms → Compliance related filings → Form MSME-1. Enter the company's CIN, PAN, and basic details. Fill in the supplier-wise data from your prepared worksheet. The MCA V3 form requires separate sections for: (a) initial return of outstanding dues (for companies filing for the first time), and (b) regular half-yearly return of outstanding dues. There is typically no government fee for MSME-1 filing. Perform the pre-scrutiny check before final submission. Download and preserve the SRN (Service Request Number) as proof of filing.
Consequences of Late / Non-Payment to MSME Suppliers
The MSME payment framework has multiple layers of consequences — ROC penalties, income tax disallowance, and compound interest under MSMED Act all apply simultaneously.
Section 405(4) Penalty — MCA
Non-filing or incorrect MSME-1: Company penalised minimum ₹25,000, plus ₹1,000 per day continuing default, up to maximum ₹3,00,000. Every officer in default faces the same penalty. Both the company and its directors are separately liable.
₹25K min + ₹1K/day → max ₹3LSection 43B(h) — Tax Deduction Disallowed
Under Section 43B(h) of the Income Tax Act (effective FY 2023-24), payments to Micro and Small enterprise suppliers outstanding beyond 45 days as on March 31 are disallowed as business expenditure. This directly increases taxable profit and tax liability.
Income tax deduction lost on late paymentsCompound Interest — MSMED Act
Under Section 16 of the MSMED Act, if a company delays payment beyond the agreed period (max 45 days), it must pay compound interest at 3× the RBI bank rate from the due date to the actual payment date. This interest is an automatic obligation — no court order needed — and cannot be contractually waived.
3× RBI rate compounding from due dateMSME Samadhaan Portal — Arbitration
An MSME supplier can file a payment dispute on the MSME Samadhaan Portal, which routes the complaint to the Micro and Small Enterprises Facilitation Council (MSEFC). The Council can conduct conciliation and then arbitration. MSEFC awards are enforceable as court decrees and can lead to attachment of company assets.
MSEFC arbitration · Enforceable as decreeTReDS Non-Compliance
Companies with turnover exceeding ₹500 crore must onboard MSME suppliers on TReDS (Trade Receivables Discounting System) platforms. Non-compliance with TReDS mandates is a separate violation under RBI guidelines and carries its own regulatory consequences.
RBI mandate · ₹500Cr+ turnover companiesDue Diligence & Credit Risk
MSME-1 filings are public records visible on the MCA portal. Investors, banks, and rating agencies review MSME-1 data during due diligence. A pattern of repeated MSME payment delays signals poor working capital management and can adversely affect credit ratings and fundraising rounds.
Public MCA record · Due diligence riskForm MSME-1 Filing — Service Packages
TAXAJ's CS team reviews your vendor list, verifies Udyam registrations, prepares the data worksheet, and files MSME-1 on MCA V3. You share the vendor ageing report — we file within 2 working days.
- ✓Udyam status verification (5 vendors)
- ✓Payment ageing analysis
- ✓MCA V3 MSME-1 filing
- ✓SRN acknowledgement
- ✓Delivery: 2 working days
- ✓Both half-year MSME-1 filings
- ✓Udyam verification (20 vendors)
- ✓Proactive deadline reminders
- ✓V3 data worksheet preparation
- ✓Section 43B(h) advisory
- ✓Dedicated CS point of contact
- ✓Both half-year filings
- ✓Unlimited MSE vendor count
- ✓Complete vendor master Udyam audit
- ✓TReDS reporting if applicable
- ✓Catch-up filing for missed periods
- ✓Tax impact analysis (Section 43B(h))