New Co. law makes disclosure of delayed payments to Micro & Small Enterprises stricter
Updated: Oct 27, 2015 02:49:53pm
Ultimately, the government has initiated some action on the burgeoning over dues of the micro and small enterprises from the large companies, for the supplies made. Through a recent notification, the Ministry of Corporate Affairs has specified reporting of principal amount due but not paid for the supplies made by the small and medium enterprises, interest accrued on the delayed payment as well as interest paid, separately, by the Corporates in their Annual Reports.
The immediate fallout of the Notification will be, the exact amount of interest paid/due on the overdue amount will be evident, leading to their exclusion from expenditure for tax purposes. Till now Companies were reporting only the total outstanding dues of micro enterprises and small enterprises, including both the principal amount and the interest due thereon, thereby clubbing the interest amount and making its exclusion from the expenditure difficult to audit.
Exclusion of accrued interest on delayed payment was an important penal provision introduced in the MSME Development Act, 2006, to discourage delayed payment to micro and small enterprises, by making a Company pay tax on the interest on the delayed payment.
By the notification dated September 4, 2015, the Ministry of Corporate Affairs has stipulated following detail information under the section ‘Trade Receivables’ of the Balance Sheet to be prepared under the Companies Act, 2013 –
(a) the principal amount and the interest due there on remaining unpaid to any supplier at the end of each accounting year;
(b) the amount of interest paid by the buyer along with the amount of the payment made to the supplier beyond the appointed day during each accounting year;
(c) the amount of interest due and payable for the period of delay in making payment;
(d) the amount of interest accrued and remaining unpaid at the end of each accounting year; and
(e) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues above are actually paid to the small enterprise, for the purpose of disallowance of a deductible expenditure.
KNN has recently published a story on about Rs 10,000 crore of over dues of micro and small enterprises from the large sector and its massive impact on the financial health of the MSMEs. It is hoped that the proper monitoring by the Auditors will deter the large enterprises to ‘play with the money’ of small enterprises. (KNN/DB)