Hello viewers, welcome to Info Thirst. Today, we are going to discuss the MSME act 2006. Before we get into the topic we would like you to Follow us by clicking the follow button. Now that you have done that...So let's dive into it…
If a business has vendors, which are categorized in micro Enterprises or small Enterprises as per the MSME act, it is essential that businesses do not delay their payments. So either your payment terms are defined as a period by which you will need to pay against their invoices, which could be less than 45 days or a maximum of 45 days, which means if you have vendors, which are micro enterprises or small enterprises .
So how do you define them?
Micro Enterprises are those, which have a total investment in plant and Machinery or equipment in that business of not over 1Cr or sales of not over 5Cr in a financial year, both these conditions need to be fulfilled and small enterprises where the investment in equipment and plant and machinery is not over 5 Cr and the annual turnover is not over 50 Cr. Which means there's a huge chance, there's a high probability, that your manufacturer and service provider vendors, (remember traders are not covered here). You need to pay them in a maximum of 45 days.
Now, what happens if you don't pay them?
They can actually approach the msme website (Without having any specific reason) provided by the government and file a complaint by uploading the purchase order and the invoice and providing any kind of proof stating that business have not been making their payments on time. Business will not only be liable to pay them the entire round but would also be liable to pay them a heavy amount of interest on top of it. The court may also impose some penalty on you. Now, if you run your own business in the form of a company, which is a private Limited, or OPC or a limited company. It is also important for you that on a half yearly basis (i.e. by 30th of April and 31st of October) you need to report to the government or the MCA through a form (MSME 1), the number of your micro and small vendors who are unpaid on 31st March and 30th September beyond 45 days, which means you also need to make sure there are no as such pending payments. There are also penalties for non reporting of this data.
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