CA Vinay Pungaliya
In India we have completed more than 6 weeks of lockdown. The phase of life which we everyone doesn’t think in their dreams. Almost all the countries are into lockdown, and businesses across the globe are operating in fear of an impending collapse of global financial markets and demand.
The Indian MSME sector is the backbone of the national economic structure and has unremittingly acted as the bulwark for the Indian economy, providing it resilience to ward off global economic shocks and adversities in past also.
All businesses, particularly micro, small and medium, have been facing unprecedented distress before the onset of the pandemic due to demonetization and GST rollout. The pandemic has increased their distress multi fold their Shops/Factories/Offices are closed for so many weeks and still the increase in demand will take some time.
MSME expectation from Government to fight economic crises:
MSME future course of action after lockdown
Due to lockdown in entire country stocks of mostly Small MSME Traders is laying in their Factories/Shops/Godown/Depot Etc. Most of goods have their own life cycle. MSMEs will need to undertake outstanding maintenance and service and clean out wasted stocks, before they can resume operations, at a significant cost and with likely write offs to stocks currently trapped on-site.
If any stock has written off or destroyed then input tax credit shall not be available in respect of good lost, destroyed, written off as per GST Act.
If the stock is destroyed, then proper input reversal must be done to save additional interest and penalty by GST department.
Cash flow of MSME is facing very sluggish pace and due to this they have to think to reduce the fixed cost. Labour cost is the one which every MSME is taking care but Lease & Rental is the cost which everyone should also need to take care off. Re-negotiating rental deals, agreements based on revenue sharing or production hours etc.
Technology is the key for success in current situation. Big corporates are using this medium by reducing their fixed cost by introducing Work from culture. Virtual Display of Goods,Use of social platform, more emphasis on digital marketing, Online B2C business channels and many other with the help of technology can be beneficial for sector like this.
Financing from Banks, NBFC or any other financial institution must be reviewed by MSME due to lockdown and economic slowdown working capital cycle for every business is under stress this need to be review properly with professional advice. If any liabilities which are at higher rate of interest, then they must be shifted to lower rate. Renegotiate the payment terms with creditors, suppliers etc.
This can be used by MSME as biggest advantage in future by giving best quality of goods to customer. This will be game changer for MSME sector good quality lead to branding of product which can be used to reach across the globe like many small players done in past.
Other Important aspect:
> Social Distancing and Precaution to be taken as suggested by government to save our life and of other also. Meeting/Conference only through by digital mode.
> Helping the Poor and needy person specially the staff member who are with us in our great time we should also abide with them in this tough time.
> Transportation / Movement of Goods and Labour with complete safety and precaution.
> Proper Sanitization of premises- Factory/Office/ Go down’s/ Shops etc to reduce chances of infection.
> Adhere to government rules, regulation and always respect the warrior of COVID-19- DOCTORS, MEDICAL PROFESSIONAL, POLICE AND CLEANERS without them we are not for nothing.