Finance Minister Ms Nirmala Sitharaman announced on Wednesday, 13th May 2020, a slew of measures under the economic package that the Honorable Prime Minister Mr Modi had declared a day earlier. Ms Sitharaman further said that there would be more measures announced in the next 3-4 days to cover various sectors/ areas in the economy.
*MSME (The Ministry of Micro, Small and Medium Enterprises) measures* under the announced economic package
1. To provide additional funding to MSME to help them crawl back to business, a medium-term funding arrangement is given by the FM of the country in the shape of Collateral free automatic loans with 4-year tenor with 12months moratorium. 100% credit guarantee on principal and interest will be provided by the Government of India. An emergency credit line can be sought from Banks/ NBFC up to 20% of total credit outstanding as on 29-2-2020. 45L MSME units expected to be benefitted and outlay of 3L crores is kept for this scheme.
2. Subordinate Debt for stressed MSMEs (which are NPA or are stressed) with an outlay of 20k Cr for the scheme. Functioning MSMEs classified as NPA or Stressed will be eligible, wherein promoters will be given debt by banks, which will be infused by promoters as equity back into MSME. 2L MSMEs are expected to get help under the scheme.
3. Fund of funds to be created for equity infusion in MSMEs which are viable and have the potential for growth. This is done with the intention of growing the MSMEs and ultimately trying to get them listed on the stock exchanges. This scheme is expected to have a funding of app. 50k Cr.
4. Definition of MSMEs is being revised to bring more and more units under the definition of MSMSE and get the benefits from classification This will remove the fear in minds of MSMEs of getting outside the preview of MSMEs and thereby were limiting their expansion or growth. Lower investment limits are being scaled up and new higher turnover criteria are also being supplemented. Differentiation between manufacturing and service units is also being done away so that both be treated at par.
*Micro units* – Investments upto 1 Cr + Turnover upto 5 Cr
*Small units* – Investments upto 10 Cr + Turnover upto 50 Cr
*Medium units* – Investments upto 20 Cr + Turnover upto 100Cr
5. Government tenders up to 200 Cr will no longer be on a global tender basis. Global tenders will be disallowed for up to 200 Cr. This will make MSMEs more active in Government purchases and will save them from unfair competition from foreign companies. A positive step toward self-reliant India and make in India approach of the Government.
6. E-market linkage to be provided for all MSMEs. Receivables by MSMEs from the Government departments and CPSE will be cleared in the next 45 days.
*EPF Measures* under the announced economic package
7. Liquidity relief for all EPF establishments (having less than 100 employees with 90% drawing less than 15k). 12% of employer contribution and 12% employee contribution was borne by Government for the month of March April and May as part of the earlier announced relief scheme. This support in the form of entire contribution, of 24%, being borne by the government has been extended for a further period of 3 months to cover June, July and August. This is estimated at 2.5K Crores with benefits going to 3.67 establishments and 72.22 L employees.
8. For other establishments, the share of both employees and employers has been reduced to 10% from earlier 12%. This will generate additional liquidity at the hands of employees and employers. Expected to benefit 6.5 Lakh establishments and 4.3 Cr employees. Not applicable to Govt. and PSU enterprises – 6.75k Cr liquidity will be induced.
*NBFC Measures* under the announced economic package
9. NBFC / HFC/ MFI is in soup and is finding it difficult to raise money via debt market, and hence their lending power is taking a big hit. Proposed 30k Cr liquidity scheme in which investment will be made in both primary and secondary market transactions in Investment-grade debt papers of NBFC, HFC and MFI which will be fully guaranteed by the Government of India.
10. NBCF/ HFC/ MFI with low credit rating also requires high liquidity to lend. Injection of 45k Cr through partial credit guarantee scheme scope expansion. AA-rated papers and below including unrated papers will be included under the scheme. First 20% loss to be borne by Government of India
*DISCOM measures* under the announced economic package
11. Revenues of power distribution companies have taken a big hit, this coupled with lower demand has created unprecedented cash flow problems for DISCOMs. PFC/ REC would be infusing liquidity to DISCOMs against the receivables so that the cycle of DISCOMs restarts with much robust. One time Emergency liquidity infusion – 90k Cr is expected. Power Generating companies should give rebates to DISCOMs for passing on to consumers
12. Ongoing public works, PPP contracts, construction & Goods and works contract services contracts will be given an extension of up to a period of 6 months to finish the obligation of finishing the work without any extra cost to the. Further Government agencies will partially release bank guarantees for partially completed contracts to ease the cash flow.
13. To avoid hardships to real estate companies due to risk of defaulting the RERA timelines. Urban Development Ministry to advice regulators to treat Covid-19 as an event of Force Majeure on contracts. To extend registration and completion date suo-moto of all registered projects expiring on or after 25 March 2020 by 6 months without seeking individual applications for it. This will destress the real estate companies and help them in competing for the projects on times once the lockdown is lifted.
*Tax Measures* under the announced economic package
14. TDS / TCS rates reduced by 25% of the original rate on non-salaried payments effective 14.5.2020 up to 31 March 2021. This will help in 50k Cr additional liquidity at the hands of the recipients of such incomes.
15. All pending refunds to charitable trusts, cooperative societies, partnerships and non-corporate taxpayers (but including LLP) will be issued immediately.
16. The due date for filing income tax returns, for assesses, which was 31st July and 31st October has been extended to 30th November 2020. For ITR filing in tax audit cases which was 30th September has been extended to 31st October 2020. This is done for FY 2019-20 only.
17. Assessments getting barred on 30 September 2020 will get barred on 31 December 2020 and the Cases getting barred on 31 March 2021 will get barred on 30 September 2021.
18. Vivaad se Vishwaas scheme has been extended up to 31 December 2020 without any extra payments of penalty/ interest / of any other additional payment.