A company has to file Form MSME-1 for a half-year only if, at the close of that half-year, it still owes money to a micro or small enterprise supplier. The amount must have been pending for more than 45 days from the date the goods or services were accepted. If every such bill was paid on time, or was paid late but before the half-year ended, the text of the 2024 amendment does not require a return. The return for April to September is due by 31 October, and the return for October to March by 30 April.
Most of the confusion around this form comes from mixing up three different clocks: the payment terms agreed with the supplier, the 15-day default period in the MSME law, and the 45-day reporting trigger. This page separates them, shows which suppliers belong in the form, walks through a worked half-year from October 2026 to March 2027, and sets out what a missed or wrong return costs. The position described is as on 1 November 2026.
The order behind the half-yearly return
Section 405 of the Companies Act, 2013 allows the Central Government to direct companies, or any class of companies, to furnish information about their working within a time it specifies. The Ministry of Corporate Affairs used that power to issue the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019, notified as S.O. 368(E) on 22 January 2019. It covers companies that get supplies of goods or services from micro and small enterprises and whose payments to them go beyond 45 days from acceptance or deemed acceptance. Those companies file a half-yearly return stating the amount due and the reasons for the delay.
On 15 July 2024 the Ministry amended that Order through S.O. 2751(E). Two things changed. A proviso now says that only companies having payments pending to micro or small enterprises for more than 45 days from acceptance or deemed acceptance must file. The old form was also replaced with a supplier-wise table. KPMG's First Notes on the 2024 amendment order summarises both changes and the new disclosure fields.
Which suppliers belong in the form
The form is limited to micro and small enterprises, and the Ministry's title for it says so: a half-yearly return on outstanding payments to micro or small enterprises. Before you build the working, sort your supplier master on these lines:
- Micro and small only. Medium enterprises hold Udyam registration too, but dues to them are outside the Order and the form.
- Classification on the Udyam certificate. Collect the certificate and read the classification it shows, rather than relying on a declaration in an e-mail. Recheck it each year, because the classification follows the enterprise's investment and turnover.
- Retail and wholesale traders. The RBI circular of 7 July 2021 on adding retail and wholesale trade to the MSME definition records the MSME Ministry's office memorandum of 2 July 2021. That memorandum brought these traders (NIC codes 45, 46 and 47) in as MSMEs for the limited purpose of priority sector lending. That limited purpose is why a trading supplier's Udyam certificate is not normally read as bringing it into the delayed-payment regime. If you exclude such suppliers, keep the NIC code and the reason in your working file.
- Who the buyer is. The Order is made under the Companies Act, so it binds companies. The form accepts a foreign company registration number as well, and section 405(5) extends the section to the Indian business of a foreign company. Partnership firms and LLPs are not covered by it.
Three clocks, only one of which triggers the return
The payment rules sit in the Micro, Small and Medium Enterprises Development Act, 2006 (the MSMED Act). Under section 15, the buyer must pay on or before the date agreed in writing with the supplier, and where there is no written agreement, before the "appointed day". The agreed period cannot exceed 45 days from the day of acceptance or deemed acceptance.
Section 2(b) defines the appointed day as the day after the expiry of 15 days from acceptance or deemed acceptance. Deemed acceptance matters because buyers rarely issue a formal acceptance. If the buyer raises no written objection within 15 days of delivery, the goods or services are treated as accepted on the day they were delivered or rendered. The WIRC of ICAI material on the MSMED Act sets out both definitions and the payment rule.
If payment is late, section 16 makes the buyer pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank, from the appointed day or the agreed date. The Development Commissioner (MSME) describes this in its note on the legal framework for delayed payments to micro and small enterprises.
The MSME-1 trigger is narrower. It looks only at amounts still pending more than 45 days after acceptance or deemed acceptance. So a bill can be overdue under the MSMED Act, with interest already running, and still not be the kind of amount that forces a return.
| Situation with the supplier | Payment due under the MSMED Act | When the amount sits in the over-45-days column of MSME-1 |
|---|---|---|
| Written agreement allowing 45 days | Within 45 days of acceptance | From day 46 after acceptance, if still unpaid |
| Written agreement allowing 30 days | Within 30 days of acceptance | From day 46 after acceptance, if still unpaid; days 31 to 45 are overdue but not yet over 45 |
| No written agreement | Before the appointed day, that is within 15 days of acceptance | From day 46 after acceptance, if still unpaid; days 16 to 45 are overdue but not yet over 45 |
| Written objection raised within 15 days of delivery | Deemed acceptance on the delivery date does not apply; work from the acceptance that follows the objection | Count 45 days from that acceptance, and explain the objection in the reason column |
A worked half-year: October 2026 to March 2027
Illustration. Sharma Auto Components Private Limited buys from five Udyam-registered suppliers. Its next return covers 1 October 2026 to 31 March 2027 and is due by 30 April 2027. The position on 31 March 2027 is:
- Kiran Castings (micro, written terms of 45 days). Goods delivered on 10 January 2027 with no objection, so acceptance is deemed on 10 January. The 45th day was 24 February 2027. ₹3,40,000 is still unpaid on 31 March, 80 days after acceptance. This amount is pending for more than 45 days.
- Vega Packaging (small, no written agreement). Delivered on 1 March 2027. The appointed day is 17 March 2027, so payment was due by 16 March and MSMED interest runs from 17 March. ₹1,20,000 is unpaid on 31 March, 30 days after acceptance, so it goes in the outstanding-45-days-or-less column.
- Nidhi Tooling (micro, written terms of 30 days). Delivered on 20 December 2026 and paid ₹2,10,000 on 10 February 2027, 52 days after acceptance. This is a payment made after 45 days, but nothing is pending at the period end.
- Om Electricals (micro). Every bill in the half-year was paid within 45 days, for example a delivery on 5 November 2026 paid on 2 December 2026 (27 days). Total paid: ₹4,75,000.
- Patel Polymers (medium). ₹6,00,000 is unpaid for 70 days. It stays out of the form because the supplier is a medium enterprise.
Kiran Castings alone makes Sharma Auto a company with payments pending for more than 45 days, so it must file. Had Kiran been paid on 30 March, the late payment to Nidhi and the overdue Vega bill would not, on the wording of the 2024 proviso, have required a return. The company would still owe MSMED interest to both suppliers.
| Supplier | Paid within 45 days | Paid after 45 days | Outstanding 45 days or less | Outstanding more than 45 days |
|---|---|---|---|---|
| Kiran Castings | Nil | Nil | Nil | ₹3,40,000 |
| Vega Packaging | Nil | Nil | ₹1,20,000 | Nil |
| Nidhi Tooling | Nil | ₹2,10,000 | Nil | Nil |
| Om Electricals | ₹4,75,000 | Nil | Nil | Nil |
| Total | ₹4,75,000 | ₹2,10,000 | ₹1,20,000 | ₹3,40,000 |
Filling the supplier table
The 2024 form opens with the company's CIN (or FCRN), name, registered office, e-mail and PAN, followed by the start and end dates of the half-year. The core is the supplier table. For each micro or small supplier it asks for the name and PAN and, in number and rupee amount, four buckets: paid within 45 days, paid after 45 days, outstanding for 45 days or less, and outstanding for more than 45 days. It also separates payments routed through TReDS (the trade receivables discounting platforms) from other modes, and asks for the reason for any delay or outstanding amount.
There is a tension in the drafting. The proviso limits the filing duty to companies with amounts pending over 45 days. Yet the note on the table asks companies to report amounts due for more than 45 days or liquidated after 45 days, and the columns ask for timely payments too. Once you are filing anyway, fill all four buckets for every micro or small supplier you dealt with in the half-year. The totals then tie back to the purchase ledger, and nobody has to explain a partial list later.
A few points decide whether the return will hold up:
- Supplier PAN. Each row needs the supplier's PAN. Collect it with the Udyam certificate at onboarding, not in the last week of April.
- Acceptance date, not invoice date. The 45 days run from acceptance or deemed acceptance. Use the goods receipt or service completion date from your records; an invoice dated before delivery will understate the days.
- A specific reason. "Funds constraint" or "under process" says little. Give the actual cause, such as a quality objection raised in writing on a stated date, a pending rate dispute, or a held invoice awaiting a credit note.
- Signature. The form is signed with the digital signature of a director, managing director, manager, company secretary, CFO, CEO or authorised representative, with that person's DIN, PAN or membership number. It is filed as a web form on the MCA portal; field-level guidance is in the MCA instruction kit for the MSME Form I web form.
Due dates and the cost of missing one
| Half-year covered | Due date |
|---|---|
| 1 April 2026 to 30 September 2026 | 31 October 2026 |
| 1 October 2026 to 31 March 2027 | 30 April 2027 |
| 1 April 2027 to 30 September 2027 | 31 October 2027 |
The consequence comes from section 405(4) as substituted by the Companies (Amendment) Act, 2020, reproduced in ICAI Navi Mumbai's text of Chapter XXV of the Companies Act. If a company fails to comply with an order under the section, or furnishes information that is incorrect or incomplete in any material respect, the company and every officer in default are each liable to a penalty of ₹20,000. A continuing failure adds ₹1,000 for each day after the first, up to a maximum of ₹3 lakh. A return filed about two months late can therefore cost roughly ₹80,000 for the company and the same again for each officer in default.
The penalty also covers a return that is filed on time but materially wrong. Leaving out a supplier, or reporting invoice-date ageing that hides an overdue amount, is exposure in its own right, separate from a missed date.
Where the same ageing data is used again
The figures you assemble for MSME-1 answer two other questions. The first is the interest owed under section 16 of the MSMED Act on every late payment, including the Vega and Nidhi bills in the illustration, which on their own would not have triggered a return. The second is the income-tax deduction. For FY 2023-24 to FY 2025-26, section 43B(h) of the Income-tax Act, 1961 allows a sum payable to a micro or small enterprise only on actual payment if it is paid beyond the section 15 time limit. The same acceptance-date ageing therefore feeds the tax computation and the tax audit report.
Keeping one register, keyed to the acceptance date and the agreed credit period of each micro or small supplier, avoids three different answers to the same question. For the half-year that ends on 31 March 2027, freeze the ageing as at that date, list every amount pending beyond 45 days, and if there is even one, file Form MSME-1 by 30 April 2027.
