Atmanirbhar Bharat Abhiyaan: Crucial Updates Announced by FM Nirmala Sitharaman to Provide Relief to MSMEs

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Pratibha Devasenapathy | May-13-2020

Prime Minister Narendra Modi, in his quintessential shock-and-awe style, yesterday announced a humongous economic package, which sought to go beyond providing immediate relief against coronavirus fallout, to make India a self-reliant economic powerhouse in the decade to come.  The prime minister on Tuesday said India has prepared a comprehensive relief package of Rs 20 lakh crore or 10 per cent of the Gross Domestic Product (GDP), including those already announced by the Reserve Bank of India and government earlier. Finance Minister Nirmala Sitharaman shared details about the key stimulus package announced by PM Narendra Modi to revive the economy. Here are the updates shared by Mrs Sitharaman in order to provide relief to MSMEs.

Revised definition of MSMEs

Composite Criteria : Investment And Annual Turnover
Classification Micro Small Medium
Manufacturing
& Services
Investment< Rs. 1 cr. and
Turnover < Rs.5 cr.
Investment< Rs. 10 cr. and
Turnover < Rs.50 cr. 
Investment< Rs. 20 cr. and
Turnover < Rs.100 cr.

Global tenders to be disallowed up to Rs 200 crores

Indian MSMEs and other companies have often faced unfair competition from foreign companies. Therefore, Global tenders will be disallowed in Government procurement tenders up to Rs 200 crores. Necessary amendments of General Financial Rules will be affected. This will be a step towards Self-Reliant India and support Make in India, eventually helping MSMEs increase their business.

Other interventions for MSMEs

  • MSMEs currently face problems of marketing and liquidity due to COVID. e-market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions
  • Fintech will be used to enhance transaction-based lending using the data generated by the e-marketplace
  • Government has been continuously monitoring settlement of dues to MSME vendors from Government and Central Public Sector Undertakings
  • MSME receivables from Gov and CPSEs to be released in 45 days

Rs. 2500 crore EPF support for business & workers for 3 more months

Businesses are continuing to face financial stress as things get normalised.  Thus, under Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of employer and 12% employee contributions was made into EPF accounts of eligible establishments. While this was provided earlier for salary months of March, April and May 2020, it now will be extended by another 3 months to salary months of June, July and August 2020. This will provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees

EPF contribution reduced for business & workers for 3 months- Rs 6750 crores liquidity support

  • Statutory PF contribution of both employer and employee will be reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months
  • CPSEs and State PSUs will however continue to contribute 12% as employer contribution
  • This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension
  • This will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees
  • This will provide liquidity of Rs 6750 Crore to employers and employees over 3 months

Rs 30,000 crore special liquidity scheme for NBFCs/HFCs/MFIs

NBFCs/HFCs/MFIs are finding it difficult to raise money in debt markets. Government will launch a Rs 30,000 crore Special Liquidity Scheme. Under this scheme investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs/HFCs/MFIs.

Rs 45,000 crore partial credit guarantee scheme 2.0 for NBFCs

  • NBFCs, HFCs and MFIs with low credit rating require liquidity to do fresh lending to MSMEs and individuals
  • Existing PCGS scheme to be extended to cover borrowings such as primary issuance of Bonds/ CPs (liability side of balance sheets) of such entities
  • First 20% of loss will be borne by the Guarantor i.e. Government of India.
  • AA paper and below including unrated paper eligible for investment (esp. relevant for many MFIs). This scheme will result in liquidity of Rs 45,000 crores

Rs. 90,000 Cr. liquidity injection for DISCOMs

Revenues of Power Distribution Companies (DISCOMs) have plummeted. Unprecedented cash flow problem accentuated by demand reduction. DISCOM payables to Power Generation and Transmission Companies is currently ~ Rs 94,000 cr

  • PFC/REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables
  • Loans to be given against State guarantees for exclusive purpose of discharging liabilities of Discoms to Gencos
  • Linkage to specific activities/reforms: Digital payments facility by Discoms for consumers, liquidation of outstanding dues of State Governments, plan to reduce financial and operational losses
  • Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries)

Relief to contractor

  • Extension of up to 6 months (without costs to contractor) to be provided by all Central Agencies (like Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc). This covers construction/ works and goods and services contracts, obligations like completion of work, intermediate milestones etc. and extension of concession period in PPP contracts
  • Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows

Extension for real estate projects under RERA

Adversely impact due to COVID and projects stand the risk of defaulting on RERA timelines. Ministry of housing and urban affairs will advise states and UTs and their regulatory authorities in the following effect:

  • Treat coronavirus as an event of 'force majeure' under RERA
  • Issue fresh project registration certificates automatically with revised timelines
  • Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25 March without individual applications

Rs 50,000 crores liquidity through TDS/TCS rate reduction

  • In order to provide more funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts shall be reduced by 25% of the existing rates.
  • Payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of TDS
  • This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow to 31st March, 2021

Other direct tax measures

  • All pending refunds to charitable trusts and noncorporate businesses & professions including proprietorship, partnership, LLP and Co-operatives shall be issued immediately
  • Due date of all income-tax return for FY 2019-20 will be extended from 31st July, 2020 & 31st October, 2020 to 30th November, 2020 and Tax audit from 30th September, 2020 to 31st October, 2020
  • Date of assessments getting barred on 30th September,2020 extended to 31st December,2020 and those getting barred on 31st March,2021 will be extended to 30th September,2021
  • Period of Vivad se Vishwas Scheme for making payment without additional amount will be extended to 31st December, 2020

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