Nirmala Sitharaman announces relief measures for MSMEs, NBFC’s, extends tax deadlines & EPF support

Prime Minister, Narendra Modi, in his speech to the nation, outlined his vision for Atmanirbhar Bharat and exhorted Indians to become vocal for our local products. PM announced a special economic package; comprehensive package of Rs 20 lakh crore. He said that the total package will be equivalent to 10 per cent of India’s GDP. PM gave a call for self-reliant India and laid down five pillars of Atmanirbhar Bharat Bold reforms across sectors will drive the country’s push towards self-reliance

Self-reliant India’s five pillars:

1. Economy, which brings in quantum jump and not incremental change.
2. Infrastructure, which should become the identity of India.
3. Systems, based on 21st century technology driven arrangements.
4. Vibrant Demography, which is the source of energy for a self-reliant India.
5. Demand, whereby the strength of the demand and supply chain will be utilized to full capacity.

Prime Minister highlighted that the package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, industries, among others.

Earlier, the government had extended a relief package worth Rs 1.7 lakh crore under PMGKY to help the poor fight coronavirus. Finance Minister Nirmala Sitharaman in the first set of announcements detailed about 15 different measures, out of which six of them for MSMEs, two for Employee provident funds, two for NBFCs, two for MFIs, one to discoms, one to real estate and three tax related measures.

Collateral-free automatic loan for MSMEs

• Rs 3 lakh crores Collateral-free Automatic Loans for MSMEs.
• For those firms with Rs 25 crore outstanding loans or annual turnover is over Rs 100 crores
• 4 -year tenure on the loans
• Moratorium of 10 months to be offered
• 100% credit guarantee to banks and NBFCs on principal and interest
• Offer valid until October 31,2020
• No fresh collateral required
• No extra fee to be charged

Schemes for stressed MSMEs

• Rs 20,000 crore liquidity through subordinate debt-based scheme
• Government to provide Rs 4,000 crore to CGTMSE for this

Fund of funds

• Infusion of Rs 50,000 crore equity into MSMEs for those who are viable and eligible
• Corpus of Rs 10,000 crore though mother-fund and daughter-fund framework
• Help MSMEs expand capacity and eventually get listed

New MSME definition

Definition of MSMEs gets a revision, investment limit revised upwards, additional criteria of turnover introducedand manufacturing and service-bases MSMEs to now enjoy same benefits.

Global tenders to be disallowed in government procurement upto Rs 200 crores

Unfair competetion from foreign companies to become a thing of the past; Global tenders to be disallowed in Government procurement upto Rs 200 crores which would help MSMEs increase their business.

EPF Support

• To ease financial stress as businesses get back to work, government has decided to continue EPF support for business and workers for 3 more months, June, July and August providing a liquidity relief of Rs 2,500 crore which would benefit 70.22 lakh employees.
• To provide more take home salary for employees and to give relief to employers in payment of PF, EPF contribution is being reduced for businesses and workers for 3 months, amounting to a liquidity support of Rs 6750 crores.  
• Government to take up PF for firms with 100 staff, earning less than Rs 15,000
• Statutory PF contribution reduced from 12 per cent to 10 per cent
• For state PSUs, govt will continue to pay 12 per cent, while govt staff pays 10 per cent

Rs 30,000 crore Special Liquidity Scheme for NBFCs/HFCs/MFIs

• Rs 30,000 crore special liquidity scheme announced
• Investment to be made in primary and secondary investments
• The debt papers will be fully guaranteed by government of India

Rs 45,000 crore liquidity infusion through a Partial Credit Guarantee Scheme 2.0 for NBFCs

• First 20 per cent of loss will be borne by the guarantor ie., the government of India
• AA paper and below including unrated paper eligible for investment

Liquidity injection for DISCOMs

• To give a fillip to DISCOMs with plummeting revenue and facing an unprecedented cash flow problem Rs. 90,000 crore emergency liquidity injection for DISCOMs

Relief to contractors

• All Government of India agencies, such as railways, roadways, to get up to 6 months extension.
• All central agencies to provide an extension of up to 6 months, without cost to contractor, to obligations like completion of work covering construction and goods and services contracts.    
• Government agencies to partially release bank guarantees.  

Real Estate

• Covid period should be treated as a force majeure and relax timelines
• States/UTs and their regulatory authorities to extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25th March, 2020 without individual applications

50,000 crore liquidity through TDS/TCS rate reduction

• Government to infuse Rs 50,000 crores liquidity by reducing rates of TDS, for non-salaried specified payments made to residents, and rates of Tax Collection at Source for specified receipts, by 25% of the existing rates.  

Due date extensions (Tax)

• Due date of all IT Return filings extended from July 31 to November 30
• Vivaad se Vishwas scheme extended till December 31,2020
• Date of assessments getting barred as on Sep 30, 2020 extended to December 31, 2020
• Date of assessments getting barred as on March 31, 2021 extended to September 30, 2021

Business Enhancement 

• E-market linkages to be provided across the board to help make up for lack of trade fairs
• Within the next 45 days, all receivables of MSMEs will be cleared by the GoI and CPSEs