Government Makes Half-Yearly Return Filing Mandatory for Companies with Delayed Payments to MSMEs
CA Gagan Gupta
Founder & Principal, Kishnani & Associates
CA Gagan Gupta is a seasoned Chartered Accountant with extensive expertise in taxation, audit, financial consulting, and business advisory. A fellow member of the ICAI since 2021, he has been practicing since 2016, providing strategic financial solutions to businesses, startups, and individuals. Under his leadership, Kishnani & Associates delivers precise and ethical financial services, ensuring seamless regulatory compliance and sustainable growth for clients.
In a major regulatory development aimed at addressing the persistent issue of delayed payments to Micro and Small Enterprises (MSEs), the Indian government has mandated that all companies must file half-yearly returns if they have outstanding dues to MSEs beyond a stipulated period. This move, initiated by the Ministry of Micro, Small, and Medium Enterprises, is intended to promote financial discipline and ensure timely payments in the business ecosystem.
As per the directive, every company that receives goods or services from micro and small enterprises and fails to make payments within 45 days from the date of delivery or acceptance must report such instances to the Ministry of Corporate Affairs (MCA). These reports must be submitted twice a year, capturing the total amount overdue and the reasons behind the delay.
Background and Objective
The Indian MSME sector is a key pillar of the economy, contributing significantly to employment, exports, and GDP. However, one of the long-standing issues faced by MSMEs is the delay in receiving payments from larger corporates and buyers. Such payment delays severely impact their liquidity and operational capacity.
Recognizing the adverse effects of this trend, the government has decided to bring in stricter compliance mechanisms. The half-yearly filing rule seeks to increase accountability among companies, while simultaneously safeguarding the interests of smaller businesses, which are often at a disadvantage in terms of bargaining power.
Scope and Applicability
This directive applies to all registered companies in India, irrespective of their size or industry. If a company has procured goods or services from any entity registered as a micro or small enterprise and the payment remains outstanding for more than 45 days, they are obligated to disclose such dues through a structured return to the Ministry.
The definition of micro and small enterprises is in line with the criteria laid out under the MSME Development Act of 2006, which considers investment and turnover thresholds to classify enterprises. This includes thousands of businesses across manufacturing and service sectors.
Reporting Format and Timelines
MCA has prescribed the format for filing the half-yearly return.
Companies will need to disclose:
- Name of the supplier (MSME)
- Amount Outstanding
- Date from which the payment became due
- Reasons for the delay in payment
Companies are required to file these returns every six months.
- April to September (to be filed by the end of October)
- October to March (to be filed by the end of April)
The filing must be completed using a dedicated online form provided by the MCA, which will form part of the company’s compliance obligations under the Companies Act.
Penalties for Non-Compliance
Failure to adhere to the new filing requirement could lead to penal consequences. The Companies Act prescribes fines for non-compliance with statutory filings, and these could apply if companies fail to submit their half-yearly reports. Furthermore, reputational risks and scrutiny from regulators may also follow for those neglecting this mandate.
This step is expected to increase transparency in corporate dealings and serve as a deterrent against delayed payments. It is also likely to encourage companies to streamline their payment cycles and adopt more efficient vendor management practices in the long run.
Industry Reaction
The announcement has received mixed reactions from the industry. While MSME associations have welcomed the move, stating that it provides a mechanism to flag chronic defaulters, some corporate entities have expressed concerns about the added compliance burden.
However, experts believe the initiative is aligned with global best practices where large buyers are held accountable for their financial dealings with smaller suppliers. It reflects the government’s broader commitment to supporting the MSME sector, which has faced multiple challenges in recent years, especially during the COVID-19 pandemic.
Conclusion
The introduction of mandatory half-yearly return filing for delayed payments to MSEs is a significant step towards promoting a more equitable and transparent business environment. It aims to ensure that micro and small businesses receive their dues promptly, thereby supporting their growth and sustainability.
As the directive comes into effect, companies will need to revisit their internal payment systems and compliance mechanisms to ensure timely reporting and to avoid potential penalties. At its core, this move reinforces the government’s intent to empower the MSME sector and build a more responsible corporate culture across the country.
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