CA Radheshyam Sharma
Analysis and suggestions on Relief Package announced by Union Finance Minister MS. Nirmala Sitharaman for MSMEs, Tax Payers and others through 15-Point Plan to Boost Indian Economy and further suggestion thereon
Union Finance Minister Nirmala Sitharaman on Wednesday (May 13) announced about Rs 6 lakh Crore package as part of measures to help the economy tide over disruptions caused by the coronavirus lockdown for which with our Expertise analyse the same suggest few additional measures which left out in this relief Package which are given as under:
Our FM has announced above package of 6 Lakhs Crore on Wednesday (May 13) which includes Rs 3 lakh crore of collateral-free loans for small businesses and a Rs 30,000 crore lifeline to non-bank and housing finance companies (NBFCs) as part of measures to help the economy tide over disruptions caused by the coronavirus lockdown. In her opening remarks, she expressed the clear vision laid down By our hon. Prime Minister Shri Narendra Modi during his special address to nation on 12th May, 2020 where She said that after spending considerable time, the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of an economic package in the fight against COVID-19.
“Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, FM Sitharaman said that our focus would be on land, labour, liquidity and law.” and this package is in addition earlier two packages being given during First Lockdown. We make an analysis of these fifteen points and suggest further Measures.
1. Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs
To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.
Suggestion: 1.. Under this relief only units having existing loans are covered but we must consider that in this pandemic and lockdown MSMEs which were not taken any loan or borrowed in past have also badly affected and they need immediate Fund to survive because interest or Emi are not only components in business and these units are alsop need funds for Purchasing Raw materials , Payment Of power Bills and Salaries as operation cycle to generate Cash will be nearly 6 months during which they need funds and at present these units are under saviour Financial Crunch
Suggestion: 2. Due to very heavy losses and difficulties being faced to maintain the growth in sales or turnover due to low demands especially in Textiles and Real Estate MSMEs will not be in position to absorb the interest burden accordingly interest for six months upto September, 2020 should be waived and these inters should not part of outstanding balance till Sept, 20
Suggestion 3. Interest Subvention @3 percent must allowed to all existing and new Borrowing for at least one year
2. Rs 20,000 crore Subordinate Debt for Stressed MSMEs
Provision made for Rs 20,000 cr subordinate debt for two lakh MSMEs which are NPA or are stressed. The government will support them with Rs 4,000 crore to Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs
Suggession : We suggest that these units should be kept out of NPA upto March 2022 and Interest Subvention must allowed and Bank should facilitate for merger or Acquisition of these units by Giving Advertisement with the condition that existing promoters should continue
3. Rs 50,000 crores equity infusion through MSME Fund of Funds
The government will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.
Suggestion : Government should invest in equity of the MSMEs and they should encourages for listing MSME platform of stock exchange where entire cost of listing including Fees of Merchant banker must be funded and listing charges also should be liberalised and subsidies this will report MSMEs.
4. New definition of MSME
Definition of MSME will be revised by raising the Investment limit. An additional criterion of turnover also being introduced. The distinction between manufacturing and service sector will also be eliminated.
Suggestion: in New Definition additional condition of turnover is laid down by having ratio in investment plant and machineries to Turnover is 1: 5 which is not realistic and it should be raised to 1: 10 because the turnover is never going to be less than 10 times to the investment in plant and machineries hence this ratio below 1:10 is not Justified
5. Other Measures for MSME
E-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days :
Suggestion : If payments are not received from private Companies or receivables including receivables from other MSMEs strict action should be taken even those companies should not be eligible for any Government Benefits and even legal support should be given Government.
6. Global tenders for govt tenders of up to Rs 200 crore
General Financial Rules (GFR) of the Government will be amended to disallow global tender enquiries in the procurement of Goods and Services of the value of less than Rs 200 crores.
Suggestion: In this tenders of local MSMEs should be reserved up to 25 Crores and professionals also should be included in this scheme as no Foreign Professional Firms should be allowed in participant of Government assignment and MSMEs Professional should be reserved upto Professional Fees upto 10 crores. This also msut be made applicable to Private Companies
7. EPF support for business and organised workers
The scheme introduced as part of PMGKP under which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020. Total benefits accrued is about Rs 2500 crores to 72.22 lakh employees.
Suggestion: Condition 90 percent Employees having salary upto 15k should be removed in this package because this compliance of this condition is very difficult
8. EPF support for business and organised workers
The scheme introduced as part of PMGKP under which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020. Total benefits accrued is about Rs 2500 crores to 72.22 lakh employees.
Suggestion: This Rate should be reduced to 8.33 percent and administrative charges of EPF should be waived. Applicability of EPF should be made units having more than 50 Employees from existing Limit of 20. Time limit for reduced percent should be continued till March 2021.
9. Special Liquidity Scheme of Rupees 30,000 crores for NBFC/HFC/MFIs
The government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity is provided by RBI. The investment will be made in primary and secondary market transactions in investment-grade debt paper of NBFCs, HFCs and MFIs. This will be 100 percent guaranteed by the Government of India.
Suggestion: This is welcome Scheme however beneficiary must provide loan at reduced rate of Interest on home loan and Micro Finance loan and additional loan secularisation scheme backed with credit Guarantee of Government must be launched
10. Rs 45,000 crore Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs
Existing Partial Credit Guarantee scheme is being revamped and now will be extended to cover the borrowings of lower-rated NBFCs, HFCs and other Micro Finance Institutions (MFIs). Government of India will provide 20 percent first loss sovereign guarantee to Public Sector Banks.
Suggestion : Losses should be absorbed after due Audit and verification by professional Chartered Accountants.
11. Rs 90,000 crore Liquidity Injection for DISCOMs
Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal instalments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.
Suggestion : Government should waive Electricity Duty upto One year and power fuel Adjustment charges should be reduced to 40 paise per unit from present rate as applicable
12. Relief to contractors
All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give an extension of up to 6 months for completion of contractual obligations, including in respect of EPC and concession agreements.
Suggestion : Payment to these contract should be given based on progress even no billing is submitted. condition of filling GST Return should be relax for this purpose
13. Relief to Real Estate projects
State governments are being advised to invoke the Force Majeure clause under RERA. The registration and completion date for all registered projects will be extended up to 6 months and may be further extended by another 3 months based on the State’s situation. Various statutory compliances under RERA will also be extended concurrently.
Suggestion : in case default at end of developers projects should be transfer to another developers where cost of balance construction should be borne by builder and in case non ability to pay government should invest and can recover from future sale or from owner to the extent amount due from them.
14. Tax relief to business
The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately. All the pending litigation should not be linked adjustment with refunds.
15. Tax-related measures
A- Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” – The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21. This will provide liquidity to the tune of Rs 50,000 crore.
B- The due date of all Income Tax Returns for Assessment Year 2020-21 will be extended to November 30, 2020. Similarly, tax audit due date will be extended to 31 October 2020.
C- The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to December 31, 2020.
Suggestion : Due to extension in due date professional Chattered Accountant or Tax Consultant will have negative impact on fee or revenue hence alternative income Resources should be provided to these professionals otherwise there will be unrest amongst educated persons which is serious for country.
Notably, Prime Minister Narendra Modi hailed the announcements made by the Finance Minister for the Atmanirbhar Bharat Abhiyan economic package worth Rs 20 lakh crore and said that the measures will go a long way for businesses and MSMEs.
Hon. Prime Minister Shri Narendra Modi tweeted, “Today’s announcements by Finance Minister Nirmala Sitharaman will go a long way in addressing issues faced by businesses, especially MSMEs. The steps announced will boost liquidity, empower the entrepreneurs and strengthen their competitive spirit.” However we request to Government for announcing additional liberal relief packages MSMEs and Small Professionals as this is not sufficient fir revival.
You have given in-depth analysis of the relief package.The suggestions given by you are really need to be implemented.