Form MSME-1: Return of Outstanding Payments to Micro and Small Enterprises

Who must file MSME-1

The Central Government, using its power under Section 405, requires specified companies to report outstanding payments to micro and small enterprises. A company is covered if it receives goods or services from micro or small enterprises and its payments to them exceed 45 days from the date of acceptance or deemed acceptance. Dues to medium enterprises are not reported.

The 45-day outer limit comes from Section 15 of the MSMED Act, 2006, which caps the payment period agreed between buyer and supplier. Where there is no written agreement, the limit is 15 days. Supplier status is determined by Udyam registration, so a supplier without Udyam registration is not treated as a micro or small enterprise for this return.

Private and public companies of any size can be covered. The test is the company's payment behaviour towards MSE suppliers, not its own turnover or capital. A company with a single overdue MSE invoice at the end of the half-year has something to report.

Due dates and periods

The return is half-yearly and covers dues outstanding for the period. A nil return is not normally required where there are no such dues, but many companies keep a working paper showing the check was done.

What the form asks for

MCA revised the reporting framework in July 2024 to collect more granular information. The current form asks for details for each micro or small supplier whose dues are outstanding beyond 45 days, which requires a clean vendor master with Udyam numbers.

• Supplier name and PAN
• Udyam registration number
• Amount due and the date from which it became due
• Amounts paid beyond 45 days during the period
• Reasons for delay in payment

Penalty and connected consequences

Section 405(4) provides that a company that fails to comply, or knowingly furnishes incorrect or incomplete information, along with every officer in default, is liable to a penalty of ₹20,000. For continuing failure, a further ₹1,000 per day applies, subject to a maximum of ₹3 lakh.

Late payment has costs beyond MCA. The MSMED Act makes the buyer liable for compound interest at three times the bank rate notified by RBI on delayed payments, and the supplier can approach the MSME Facilitation Council. Income-tax law also restricts the deduction for MSE dues paid late (section 43B(h) under the 1961 Act; check the equivalent provision of the Income-tax Act, 2025).

Common mistakes

Build MSME-1 into the month-end routine rather than treating it as a twice-a-year exercise. Finance teams that record the acceptance date on each MSE invoice and run a 45-day ageing report monthly usually find the return quick to prepare, and catch overdue invoices before interest builds up.

The usual problem is incomplete data: vendors not asked for Udyam status, dates of acceptance not tracked, or medium enterprises reported by mistake. Others include reporting gross amounts instead of only dues beyond 45 days, and missing the 31 October deadline after the busy annual filing season. Agreeing payment terms of 45 days or less with MSE suppliers reduces both reporting and interest exposure. Refogo's partner professionals can prepare MSME-1 from your payables data for a fixed fee.

Step by step

1. 1Classify vendors

   Collect Udyam certificates and tag micro and small suppliers.

2. 2Run an ageing report

   Identify invoices unpaid beyond 45 days from acceptance.

3. 3Record reasons

   Note the reason for each delayed payment.

4. 4Fill MSME-1 on V3

   Enter supplier-wise details for the half-year.

5. 5Sign and submit

   Director or CS signs with DSC before the due date.