COVID Relief Measures Announced by Finance Ministry for MSMEs

  • Rs 3 Lakh Crores Collateral-free Automatic Loans

> Emergency Credit Line from Banks and NBFCs up to 20% of entire outstanding credit as on 29.02.2020

>  Borrowers with up to Rs 25 Crore Outstanding and Rs 100 Crore Turnover eligible.

>  Loans to have 4-year tenor with moratorium of 12 months on Principal repayment

>  Interest to be capped

>  100% credit guarantee cover to Bank and NBFCs on principal and interest

>  Scheme can be availed till 31st October 2020

>  No guarantee fee, no fresh collateral

  • Rs 20,000 Crores Subordinate Debt

>  Government of India will facilitate provision of Rs 20,000 Crore as Subordinate Debt

>  Govt will provide a support of Rs 4,000 Crore to CGTMSE

>  CGTMSE will provide Credit Guarantee Support to Banks

>  Promoters of the MSME will be given debt by banks, which will then be infused by promoter as equity in the Unit

  • Rs 50,000 Cr Equity Infusion through Funds of Funds

>  Fund of Funds with corpus of Rs 10,000 Crores will be set up

>  Fund of Funds will operate through a Mother Fund and few daughter funds

>  Fund Structure will help leverage Rs 50,000 Crore of Funds at daughter funds level

>  Global Tenders to be disallowed in Government Procurements upto Rs 200 Crores

>  Receivables from Government and CPSEs to be released in 45 days

MSME Definition

Existing MSME Classification
Criteria: Investment in plant & Machinery or Equipment
Classification Micro Small Medium
Mfg. Enterprises Investment<Rs.25 Lac Investment<Rs. 5cr. Investment<Rs. 10 cr.
Services Enterprises Investment<Rs.10 Lac Investment<Rs. 2cr. Investment<Rs. 5cr.
Revised MSME Classification
Composit Criteria: Investment and annual Turnover
Classificatio Micro Small Medium
Mfg. Enterprises Investment<Rs. 1cr. Investment<Rs. 10cr. Investment<Rs. 20 cr.
Services Enterprises Investment<Rs.5cr. Investment<Rs. 50cr. Investment<Rs. 100cr.

Note: MSMEs does not cover trading activities.

Other Benefits Available to MSMEs

1. Payment from Parties

As per Section 15 of The Micro, Small and Medium Enterprises Development Act,2006 , where any supplier supplies any goods or renders any services to the buyers, the buyer shall make payment thereof on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed date.

Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.

2. Calculation of Interest Receivable

As per Section 16 of The Micro, Small and Medium Enterprises Development Act,2006, Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being inforce, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or as the case may be from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank of India.

3. CGTSME Scheme

As per Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTSME) Scheme, collateral free loans up to a limit of Rs 200 Lakh is available for Individual MSE on payment of guarantee fee to bank by the MSE

4. CLCSS Scheme

As per the Credit Linked Capital Subsidy for Technology Upgradation (CLCSS), it provides 15% subsidy for additional investment up to Rs 1 crore for technology upgradation.

5. Technology and Quality Upgradation Support to MSMEs

Capacity building of MSME clusters for energy efficiency/clean development and related technologies. Funding support of up to 75% for awareness programmes, subject to maximum of Rs 75,000 per programme; Implementation of energy efficient technologies in MSME units 75% of actual expenditure for cluster level energy audit and preparation of model DPR; Setting up of Carbon Credit Aggregation Centres. 50% of actual expenditure subject to maximum Rs 1.5 lakh per DPR towards preparation of subsequent detailed project reports for individual MSMEs on EET projects; 25% of the project cost as subsidy by Government of India, balance amount to be funded through loan from SIDBI/banks/ financial Institutions. MSMEs are required to make the minimum contribution as required by the funding agency; 75% subsidy towards licensing of products to national/ international standards; ceiling Rs 1.5 lakh for obtaining product licensing/marking to National standards and Rs 2 lakhs for International standards.

Key Definitions

Appointed Date: It means the day following immediately after the expiry of the period of fifteen days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

Day of Acceptance: It means –

 (a) the day of the actual delivery of goods or the rendering of services, or

(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the date of the delivery of goods or rendering any services, the day on which such objection is removed by the supplier

Day of Deemed Acceptance: It means where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the date of the delivery of goods or rendering any services, the day of the actual delivery of goods or the rendering of services.

Registration Process

  • MSME registration can be done online by filing the Udyog Aadhar Form available on https://udyogaadhaar.gov.in/UA/UAM_Registration.aspx
  • There is no registration fees for the same and self-certified certificates are to be uploaded.

References

  • https://msme.gov.in/all-schemes
  • The Micro, Small and Medium Enterprises Development Act, 2006
  • https://udyogaadhaar.gov.in/
  • Atmanirbhar Bharat Presentation Part – 1 : Business including MSMEs

 Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. The author does not accept any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied without express written permission of the author.

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Qualification: CA in Practice
Company: Anand Gupta & Associates
Location: Kolkata, West Bengal, IN
Member Since: 18 Nov 2019 | Total Posts: 1
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One Comment

  1. Jigar Shah says:

    Thank you for your post.
    I have one query regarding MSME benefits announced by Finance Minister:
    Query: The benefits announced by Finance Minister are only applicable to MSME which are already register under MSME Act or if i am registering today under MSME Act, than it will be applicale to new registration also?

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