MSME Form 1 October 2026: What Companies Need to Know About Delayed MSME Payments and TReDS

A delayed MSME payment is no longer only an accounts-payable issue. Depending on the circumstances, the same payment delay can become relevant to company law reporting under MSME Form 1 and tax treatment under Section 43B(h) of the Income-tax Act.

The two provisions operate differently. But for CFOs, finance controllers, treasury teams and accounts-payable leaders, they point to the same operational question:

How is the organisation managing MSME supplier payments before they become overdue?

MSME Form 1: What Companies Need to Know Before 31 October

MSME Form 1 is a half-yearly filing under Section 405 of the Companies Act, 2013. The 2024 amendment to the Specified Companies Order clarified that specified companies having payments pending to Micro or Small enterprises for more than 45 days from the date of acceptance or deemed acceptance of goods or services are required to furnish the information, subject to the applicable statutory requirements.

For companies preparing their filing, the MSME Form 1 itself is available through the Ministry of Corporate Affairs. The form provides for reporting outstanding payments to Micro or Small enterprise suppliers and includes transaction-level information.

For the current reporting cycle:

Medium enterprises do not fall within this particular Form 1 reporting requirement.

The important distinction is that MSME Form 1 is not simply a record of all purchases made from MSMEs. It relates to qualifying delayed payments to Micro and Small enterprise suppliers.

The V3 Form Makes Payment Ageing More Visible

The revised MSME Form 1 became web-based as part of the MCA's V3 rollout. The MCA's Form 1 FAQs state that the form captures the number and amount of transactions paid within 45 days, paid after 45 days, outstanding for 45 days or less and outstanding for more than 45 days.

That changes the practical compliance conversation.

Finance teams need visibility into the underlying MSE status, invoice acceptance or deemed acceptance date, payment status and ageing of relevant transactions.

An invoice date alone may not provide the complete picture.

For organisations handling thousands of supplier invoices, payment ageing therefore needs to be connected with accurate supplier classification and acceptance data rather than reviewed only when a filing deadline approaches.

Non-Filing Can Create a Separate Penalty Exposure

Where a specified company is required to furnish MSME Form 1 but fails to comply, Section 405(4) of the Companies Act provides for monetary penalties.

The prescribed exposure includes:

This is separate from the commercial amount owed to the MSE supplier.

The filing obligation therefore creates an additional compliance layer around a payment delay that already exists in the accounts-payable ledger.

One Payment Delay Can Also Become a Tax Issue

This is where MSME Form 1 and Section 43B(h) converge operationally.

Section 43B(h) covers sums payable to a Micro or Small enterprise beyond the time limit specified under Section 15 of the MSMED Act, 2006. The Income Tax Department has specifically addressed the treatment of delayed payments to MSMEs under Section 43B(h). Income Tax Department guidance on Section 43B(h)

The important point is that the MSME Form 1 threshold and the Section 15 payment timeline should not simply be treated as the same rule.

The MSMED Act contains specific provisions governing payment to Micro and Small enterprises. The Ministry of MSME explains that Sections 15 to 24 deal with delayed payments and related mechanisms for MSEs.

For tax purposes, the applicable payment period therefore needs to be assessed under Section 15 of the MSMED Act and the terms governing the particular transaction.

Where the applicable conditions under Section 43B(h) are met, the timing of the related business-expense deduction can be affected.

For finance teams, this means the same supplier population may need to be reviewed separately for company-law reporting and tax purposes.

MSME Form 1 vs Section 43B(h)

The two provisions should therefore not be treated as two versions of the same compliance exercise.

The root operational issue is the same payment data: who the supplier is, when the invoice was accepted, how long it has remained unpaid and when it is ultimately settled.

Consider a Buyer With Three Overdue MSE Invoices

Assume a company has three accepted invoices from qualifying Micro or Small enterprise suppliers:

The total outstanding MSE payable is ₹25 lakh.

For MSME Form 1, the company needs to evaluate the transactions against the applicable reporting requirements for the relevant half-year.

For tax purposes, the same payments need to be assessed separately under Section 43B(h) and the applicable Section 15 timeline.

The ₹25 lakh commercial payable has therefore created multiple internal workstreams from one payment-ageing problem.

And that raises a more useful question:

Can the payment cycle be managed before the invoice becomes a compliance exception?

The Better Approach: Manage the Payment Before It Becomes a Compliance Exception

Most compliance responses begin after an invoice has already crossed the relevant threshold.

The finance team identifies overdue invoices. Secretarial teams prepare the required disclosure. Tax teams examine the applicable treatment. Accounts teams reconcile supplier classifications, acceptance dates and payment records.

That is necessary once an exception exists.

But companies can also look at the problem earlier.

Instead of only improving the reporting of delayed MSME payments, finance teams can examine whether eligible supplier invoices can be financed before the original payment due date.

This is where a TReDS platform can become relevant to the payment architecture.

TReDS Starts With More Than Financing

A common explanation of TReDS is simple: an accepted invoice is presented to financiers, a bid is selected and the MSME receives early payment.

For a corporate buyer, there is another operational layer that matters: the quality of the invoice and payment information entering the transaction.

Supplier identification, invoice details, buyer acceptance and settlement information all need to be accurate for the financing process to work properly.

This means TReDS can sit within the wider supplier-payment workflow rather than being treated as a separate financing activity.

The Reserve Bank of India describes TReDS as a platform for uploading, accepting, discounting, trading and settling MSME invoices and bills, with MSME sellers, buyers and permitted financiers participating in the system.

For corporate buyers, this makes the underlying payment workflow important. The better the organisation's visibility into supplier information, invoice acceptance and settlement status, the easier it becomes to integrate receivables financing into its existing finance process.

RBI also publishes entity-wise TReDS statistics covering registered MSME sellers, buyers, financiers and Factoring Units uploaded and financed. This provides an independent view of activity across the TReDS ecosystem.

How TReDS Changes the Supplier Payment Cycle

TReDS enables eligible MSME receivables accepted by the buyer to be presented to participating financiers for competitive bidding.

The basic flow is:

At Invoicemart, we connect MSME suppliers, corporate and institutional buyers and multiple financiers through our RBI-approved TReDS platform.

Once an eligible invoice is accepted by the buyer, participating financiers can bid to finance it. After the applicable bid is accepted, the MSME receives early payment, while the buyer settles with the financier according to the applicable transaction terms.

For MSME suppliers, our invoice discounting platform provides a digital route to access financing against eligible approved invoices.

For the supplier, this can convert an outstanding receivable into usable liquidity earlier.

For the buyer, it provides a structured way to support supplier liquidity without necessarily bringing forward its own cash outflow.

What Finance Teams Should Review Before 31 October 2026

With the April–September filing period approaching, companies should review four areas:

The objective is not merely to prepare an accurate filing on 31 October.

It is to build a payment process that gives finance teams better visibility into supplier ageing and provides an appropriate financing route before liquidity pressure turns into a recurring payment problem.

The Deadline Is 31 October. The Payment Process Starts Earlier.

MSME Form 1 and Section 43B(h) sit under different statutory frameworks and create different consequences. But both make accurate supplier classification, invoice acceptance and payment-ageing information important for corporate finance teams.

The answer cannot be limited to better reporting after an invoice becomes overdue.

It also requires organisations to examine the payment cycle earlier and consider appropriate financing mechanisms for eligible MSME receivables.

At Invoicemart, we provide an RBI-approved TReDS platform that connects MSME suppliers and corporate buyers with multiple financiers, creating a structured route for early liquidity against eligible accepted receivables.

For finance teams, the objective is simple: identify payment risks earlier, maintain better visibility and give eligible suppliers a route to liquidity before delayed payments become a recurring exception.