PM in his speech quoted ‘Jaanbhi, Jahan bhi’ amidst nation-wide lockdown due to COVID-19 pandemic. To make it possible the Hon’ble PM in his speech on 12.05.2020 proposed robust economic reforms for 20 trillion rupees which is roughly 10% of India’s GDP.
Therefore, the FM announced the first part of continuous series of reforms on 13.05.2020. Total 15 kinds of reforms were proposed by FM in different sector with more to come. In this article, an effort is being made to bring down these reforms at one place in a comprehensive manner.
Reforms in MSME sectors
1. Rs. 3 lakh crores Collateral-free automatic loans for business, MSMEs
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- The Govt. has proposed Rs. 3 lakh crores Collateral-free Automatic Loans for Business, including MSMEs. For this purpose, an emergency credit line has been allowed where business/MSMEs can avail up to 20% of their entire outstanding credit as on 29.2.2020 from banks and NBFCs.
- Borrowers having outstanding up to Rs. 25 Crores and turnover of Rs. 100 crores are eligible to take the benefit.
- The tenure of the loan would be 4 years with moratorium of 12 months on Principal repayment.
- There will be 100% credit guarantee cover to Banks and NBFCs on principal and interest.
- This scheme can be availed till Oct 31, 2020
- There would not be any guarantee fee or fresh collateral requirement for availing benefit under the scheme.
2. Rs. 20,000 crores subordinate debt for stressed MSMEs
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- The Govt. has proposed provision of Rs. 20,000 crores as subordinate debt to MSMEs that are NPA or are stressed.
- Under the scheme promoters of the MSMEs will be given debt by banks which will then be infused by promoter as equity in the unit
- CGTMSE will provide partial credit guarantee support to banks. This will be backed by the Govt. support of Rs. 4,000 crores. CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises) is a government initiative by the Ministry of MSME in association with the Small Industries Development Bank of India (SIDBI). It’s focus is to provide credit guarantee to financial institutions that provide loans to MSMEs
3. Rs. 50,000 crores equity infusion for MSMEs through funds of funds
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- The Govt. has proposed to set up Funds of Funds (FoF) with corpus of Rs. 10,000 crores.
- The corpus would provide equity funds for MSMEs with growth potential and viability.
- The FoF will be operated though Mother Fund and few Daughter funds.
- The fund structure will help leverage Rs. 50,000 cr. Of funds at daughter funds level.
- This step would help to expand MSME size as well as capacity and will also encourage listing of MSMEs on main board of stock exchanges.
4. Amendment to Definition of MSME
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- The Govt. has announced revised definition of MSMEs
- The revised criteria would be,
| Existing MSME Classification | |||
| Criteria: Investment in Plant& Machinery or Equipment | |||
| Classification | Micro | Small | Medium |
| Mfg.Enterprises | Investment<Rs.25 lac | Investment<Rs.5 cr. | Investment<Rs. 10cr. |
| Services Enterprise | Investment<Rs.10 lac | Investment<Rs. 2cr. | Investment<Rs.5 cr. |
| Revised MSME Classification | |||
| Mfg.and Service Enterprises | Investment<Rs.1 Crore And Turnover<Rs. 5 Crore | Investment<Rs.10 Crore And Turnover<Rs. 50 Crore | Investment<Rs.20 Crore And Turnover<Rs. 100 Crore |
5. Govt. expands scope for global tenders for MSMEs
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- The Govt. has decided to disallow the foreign Companies for Government procurement tenders of upto Rs. 200 crores.
6. Other measures for MSMEs
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- aims to promote e-market linkage for MSMEs which would act as a replacement for trade fairs and exhibitions.
- Fintech will be used to enhance transaction based landing using the data generated by e-market place.
- MSMEs receivable from Govt. and CPSEs shall be released in 45 days.
Reforms in EPF
1. Pradhan Mantri Garib Kalyan Package (PMGKP)
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- had proposed a payment of 12% of employer and 12% of employee contribution into eligible EPF accounts for month of Mar, Apr, and May now this has been proposed to further extend for next three months of Jun, July and August for wage earner below Rs. 15,000 p.m. and business having less than 100 workers.
2. Reduction in EPF contribution for next 3 months
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- The Statutory PF contribution for both employee and Employer has been reduced from 12% to 10% for all establishments covered by EPFO.
- This scheme will be applicable for workers who are not eligible for 24% EPF support under PMGKP
- For Govt. undertaking the contribution shall remain at 12%.
Reforms for NBFCs, Housing Finance Cos. and Micro Finance Institutions
1. Rs. 30,000 crores special liquidity scheme
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- The investments will be made in both primary and secondary market transactions in investment grade debt paper of these institutions.
- Securities will be fully guaranteed by Govt. of India
2. Rs. 45,000 crores Partial Credit Guarantee Scheme for NBFCs
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- Existing PCGS scheme shall be extended to cover borrowings such as primary issuance of Bonds/CPs
- First 20% loss will be borne by Govt. of India
- AA Paper and below ratings paper including unrated papers will be eligible for investment
Reforms in DISCOMs
1. Rs. 90,000 crores Liquidity Injection
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- Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will infuse liquidity in the DISCOMs to the extent of Rs. 90,000 crores against receivables
- Loans to be given by these institutions against State guarantees
- Digital payment facility for consumers and liquidation of outstanding dues of State Govt.
- Central Public Sector Generation Companies e.g. NTPC, NHPC etc. shall give rebate to DISCOMs which shall be passed on to the final consumers i.e. industries.
Reforms for Contractor
1. Extension for Govt. Contracts
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- Extension of upto 6 months shall be provided by all Central Agencies like Railways, NHAI, CPWD etc. without any cost to contractors
- Government Agencies will partially release bank guarantees to the extent contracts are partially completed
2. Extension of Registration and Completion Date of Real Estate Project
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- Ministry of Housing and Urban Affairs will advise States and UTs to extend the registration and completion date by 6 months for all registered projects expiring on or after 25.03.2020 without any individual application. This may be extended for further 3 months if required.
- To issue fresh ‘Project Registration Certificates’ automatically with revised timelines
- Extend timelines for various statutory compliances under RERA concurrently
Reforms in Direct Tax
1. TDS/TCS rate reduction
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- The rates of TDS/TCS in respect of specified payments/receipts shall be reduced by 25%.
- This concession in the rate shall be available for the tax deducted or collected between 14-05-2020 till 31-03-2021.
- This relief shall not be available to a salaried and non-resident taxpayer.
2. Pending Refunds
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- All pending refunds to charitable trust and non-corporate businesses and professions shall be released immediately
3. Extension in due date for certain compliance
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- Due date of all Income-tax return for the Financial Year 2019-20 will be extended from July 31, 2020 and October 31, 2020 to November 30, 2020.
- The due date for tax audit under section 44AB shall be extended from September 30, 2020 to October 31, 2020
- The last date for opting Vivad se Vishwas Scheme without paying additional 10% of the disputed tax shall be extended till December 31, 2020
- Due date of 30-09-2020 for completion of assessments shall be extended to 31-12-2020. Where assessments are getting barred on 31-03-2021, it shall be extended to 30-09- 2021.
About the Author
Author is Amit Jindal, ACA working as Manager Taxation in Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India.
Also Read-
| Atma Nirbhar Bharat: Part-1: Businesses including MSMEs | Text of FM Press Release on 13.05.2020 |
| Atma Nirbhar Bharat: Part-2: Poor, including migrants and farmers | Text of Press Release on 14.05.2020 |
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