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Revised - MSMED Act - 03.07.2021
Revised - MSMED Act - 03.07.2021
Revised - MSMED Act - 03.07.2021
CA.Marathe-CMRS
Introduction
MSME = Micro, Small & Medium Enterprises
CA.Marathe-CMRS
Strength…
6.5 crores units which include Home, cottage, village, tiny
units (69%)
6,000+ products
CA.Marathe-CMRS
MSMED CMEGP
Cluster GeM Act TReDS
Sub up
Debt India
S
I am a MSME
CA.Marathe-CMRS
Formalization process of MSME Sector
2003 2021
MCA circular on
Enabling MCA circular to
reporting of Audit Reporting
provisions 500 Cr + Corps
MSME o/s
CA.Marathe-CMRS
Detailed analysis of
Important Provisions of
Micro Small & Medium Enterprises
Development (MSMED)
Act 2006
[6 Chapters – 32 Sections]
CMRS-Marathe
Preamble: An Act to provide for facilitating the promotion and
development and enhancing the competitiveness of micro, small and
medium enterprises and for matters connected therewith or incidental
thereto.
Specifically to address:
CMRS-Marathe
CREDIT PERIOD
CMRS-Marathe
S15: Buyers Liability to make Payment
Where any supplier supplies any goods/services, the buyer shall make
payment thereof on or before the date agreed upon between him and
the supplier in writing.
In no case the period agreed upon between the supplier and the buyer
in writing shall exceed forty-five days from the day of acceptance or
the day of deemed acceptance.
CMRS-Marathe
Appointed Day: the day following immediately after the expiry of the period of
fifteen days from the day of acceptance
CMRS-Marathe
Credit period interpreted
Appointed Day, Day of Acceptance, Day of Deemed Acceptance
Payable within Credit
SN Scenario Deciding date (days) Period
No agreement, no
S1 Query Day of delivery (deemed acceptance) 15 of delivery 15
BAJAJ Auto 0 0 0 0 0 0 0
CA.Marathe-CMRS
Corporate Thinking
Corporate Buyers have two lines of thinking towards payments to MSME
Provide the interest, build the provision and write it off at the end of 3rd
year – this treatment amounts to non-compliance of section 17.
CMRS-Marathe
Legal Opinion
A listed company has an accumulated Int provision of Rs. 65 laks - Legal
opinion sought on whether the company can write back the same by
obtaining a no due undertaking from the supplier:
Supreme court advocate opined –
1. Such undertaking may run contrary to provisions of Sec 16 and could
be held void in law.
2. As the audited financials already state the payables the said
undertaking would prove to be false.
3. All provisions are mandatory and aimed at fortifying the SMEs in
their transactions with large entities.
4. Writeback or adjustment is not advisable
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DISPUTE RESOLUTION
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S18: Arbitration and Conciliation
Dispute with regard to any amount due under section 17, to be referred
to the MSE Facilitation Council.
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Provisions conti….
Every reference made under this section shall be decided within a
period of 90 days
No appeal in any court unless the appellant (not being a supplier) has
deposited with it 75% of the amount
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Overriding Provisions
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Case law
1) M/S. Eden Exports Company & other vs Union Of India on Aug-
2010 - Madras High Court.
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IMP PARA OF JUDGMENT: It must also be noted that the previous 1993 Act
providing for 120 days outer time limit for credit facilities was not working
satisfactorily and the Micro and Small enterprises were driven to the point of
extinct. Therefore, outer time limit of 45 days was fixed. In normal
circumstances, when goods are delivered and services are rendered, payments
are to be made instantaneously. It is by agreement credit facilities can be
worked out between the parties and such agreements are controlled by the
Contract. The Parliament has ample power to restrict such contract. The fixing of
time limit is to save the Micro and Small Enterprises from going out of existence
due to wanton delay in payments by the buyers. To that extent, right to enter
into contract can be curtailed. Such curtailment cannot be said to be either
arbitrary or unconstitutional.
CA.Marathe-CMRS
Amendment to
MSMED Act 2006
And other Recent
Developments
MCA Notif – 500Cr+
MCA Notif – MSME 1
Sch – III
CA.Marathe-CMRS
New Definition of MSME – w.e.f - 1st July, 2020
Manufacturers &
MICRO SMALL MEDIUM
service providers
Investments in
Upto Rs. 10 Upto Rs. 50
Plant & Machinery Upto Rs. 1 crore
crores crores
or Equipment
CA.Marathe-CMRS
Exclusions from Investments
Pollution control, R&D, industrial safety devices
Tools, jigs, dies, molds, spare parts & consumables
installation and transportation cost of P&M
Generator, Extra transformer
Gas producer Plants
Cost of Know-how for P&M
Fire fighting Equipment
VAT and Cenvat
CMRS-Marathe
The change
Definition (Limits) changed after 14 long years. .
CA.Marathe-CMRS
Registration Process
IS NOW
www.udyogaadhaar.gov.in
www.udyamregistration.gov.in
CA.Marathe-CMRS
Calculation of Investment in Plant & Machinery or
Equipment:
CA.Marathe-CMRS
Issues?? Gross Block Vs. WDV – Portal capturing WDV?
CA.Marathe-CMRS
Office Memorandum – Value of P& M
CA.Marathe-CMRS
Very Important to Note (For CA Certificate)
All units with GSTIN listed against same PAN shall be clubbed &
collectively treated as one enterprise.
CA.Marathe-CMRS
Changing Policy Framework & MSME Strategies
MCA Notifications
Sch – III requirements
MSME Enablers
CA.Marathe-CMRS
Companies with > 500 cr turnover to enroll on
TReDS platform – Nov 2108
All companies with a turnover > Rs. 500 crore and all Central PSEsshall be
required to get themselves onboarded on the Trade Receivables
Discounting System platform, set up as per the notification of RBI.
CA.Marathe-CMRS
MSEs o/s > 45 days reporting half yearly
MCA Notification - 22 January, 2019
All companies, who get supplies of goods or services from MICRO AND
SMALL ENTERPRISES and whose payments to micro and small
enterprise suppliers EXCEED FORTY FIVE DAYS from the date of
acceptance or the date of deemed acceptance of the goods or services as
per the provisions of section 9 of the MSMED Act - hereafter referred to
as “Specified Companies”
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Filing Requirement
Filing of half yearly return of dues to MICRO OR SMALL
ENTERPRISES suppliers by 31st October for the period from April to
September and by 30th April for the period from October to March.
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Schedule III amendment – 1st April 2021
Trade Payables:
(A) total outstanding dues of micro & small Entp; and
(B) total outstanding dues of creditors other than micro & small Entp.
Additionally, following ageing schedule shall be given
CA.Marathe-CMRS
Clause 22 of 3CD
Amount of interest inadmissible under section 23 of MSMED Act 2006
CA.Marathe-CMRS
Audit Procedure
Documentation of process to verify whether the auditee has identified its
MSE suppliers.
CA.Marathe-CMRS
Qualification in Audit report?
Report on Other Legal and Regulatory Requirements:
Company has not identified units covered under MSMED Act 2006 and
hence disclosure as required under Companies Act 2013 and MSMED Act
2006 is currently not ascertainable. (Refer Point _____ of standalone
financial statements).
Qualification to be quantified?
The financial impact of the non provision of interest on Profit of the
company is Rs. _______/is not ascertainable in the absence of data.
CA.Marathe-CMRS
Recovery SAMADHAAN
Approach the
realted Under MSME
buyer P
DISPUTE? Act-2006
A
Y
P
M
A
E
Y
MSME N
M
Samadhaan T
E
N
N
T
E O
N T
R FC
D
E Hearing R
C
E
E
C
I
E
V
I
E Execution V
D petition E
D
CA.Marathe-CMRS
The concept
TReDS is an Electronic Platform facilitating the financing of trade
receivables of MSMEs through multiple FIs.
Receivables can be from Corporates And Other, including Govt. Depts & PSUs.
This a well regulated form of Bill Discounting, initiated by MSME ministry.
BANKS/FI
(LENDERS)
TReDS
PLATFORM
CORPORATE MSME
(BUYER) (SELLER)
CA.Marathe-CMRS
A CRISIL study says if SMEs get paid as per the provisions of
MSMED Act, their profitability will go up by 15%
ThanQ ?
camarathe@cmrs.in
8055566683
CA.Marathe-CMRS