MSMEs now have a lower risk of operating without interruptions because of the Government of India's UDYAM registration process. But since it's not required, one of the most difficult things for business owners to do is find out if their MSME suppliers have registered with UDYAM.

We'll go over how to check if your suppliers are registered with the MSME UDYAM Scheme in this blog post. We will also talk about the significance of the MSME 1 Form and the changes to MSME payments from April 1, 2024.

 

Important Notes for Working with MSME Suppliers Who Are Registered.

When working with MSME suppliers who are registered under UDYAM (MSME), enterprises should mainly have the following three points in mind:

Rule for 45-day and 15-day Payment

Businesses that do business with suppliers who are registered as MSMEs should abide by the MSME Act of 2006's payment guidelines. The following are the key ideas in relation to these rules:

If a credit period (date of payment) cannot be agreed upon between businesses and MSME suppliers, then businesses must pay the suppliers within 15 days of the day they receive the goods or services.

Businesses must pay MSME suppliers within 45 days on the day they receive the goods or services if they and the suppliers agree on a credit period longer than 45 days.

Businesses shall pay MSME suppliers within the mutually agreed upon timeframe (30, 25, 40 days, or whatever was agreed upon in writing) when they and the suppliers agree on a credit period of more than 15 days but less than 45 days.

Businesses that fail to make supplier payments on schedule risk incurring interest charges three times the rates outlined by the RBI.

This regulation was put in place to shield MSME-registered suppliers against late or non-payment from businesses that do business with them.

 

Form 1 for MSME

When working with suppliers who are registered as MSME, one of the main compliance requirements that companies need to be aware of is the MSME Form 1. Here are some crucial details regarding this form:

The MSME Form 1 is released by the Ministry of Corporate Affairs (MCA). The MCA introduced this return form on January 22, 2019, in an effort to give the MSME Development Act of 2006 greater legitimacy.

One of the several guidelines the MCA has released to guarantee openness in the operations of MSMEs is MSME Form 1.

A half-yearly report known as MSME Form 1 is required of companies doing business with suppliers who are registered as MSME's.

All of their unpaid invoices to these vendors are listed in this return.

Finding the businesses that owe money to MSME suppliers is the primary goal of MSME Form 1. By doing this, it is made sure that these payments are routinely tracked down and suppliers are paid on schedule.

Exclusion of Expenses

The Finance Ministry recently proposed the changes to MSME payments under Section 438(h) of the Income Tax Act of 1961 which are detailed below. These will go into effect on April 1st, 2024. Among them are:

Companies may request a disallowance in the year that costs were incurred if they fail to pay MSME suppliers within the 45-day or 15-day cycle but do so later in the same fiscal year.

Payments must be made during the same fiscal year, otherwise, the claimant may only deduct expenses in the year that the costs were incurred rather than when they were accumulated. 

How Can I Find Out Whether My Suppliers Are Registered With MSME UDYAM?

In case you are unsure of your suppliers' UDYAM registration status, you can inquire about it using the following methods:

Examine the invoice from the supplier.

A distinct MSME Registration Number is issued to suppliers who register with UDYAM. This number indicates that they are registered under the UDYAM scheme if you carefully examine their invoices.

The invoice additionally indicates if a given invoice falls under the micro, small, or larger category. This will help you gauge how your supplier's business is doing.

Check out the MSME's official website.

Typically, the invoice contains all the information regarding the MSME registration status of the suppliers. You can check the status by using the suppliers' PAN and AADHAAR numbers if you are unable to find these details on the invoice.

You can use your own credentials to validate your AADHAR and access the official MSME portal in order to use this feature and verify the status of your supplier.

Select the "Organisational Specifics" option here. Select the kind of organisation you want to work for (cooperative societies, partnership firms, sole proprietorships, and more).

Take the PAN information from the suppliers' invoices and insert it next to the organisation type. The notice "UDYAM Registration has already been completed through this PAN" may appear to you.

 

 

Updated on: April 26, 2024