To implement the Aatmanirbhar Bharat Abhiyan announced by the Hon’ble Prime Minister Narendra Modi, today the Union Finance Minister Nirmala Sitharaman has announced various support schemes and relief measures for sectors, which were affected due to COVID-19. These measures majorly include support to MSMEs, workers, businesses covered under EPFO, NBFCs, DISCOMs, and real estate.
This article covers the revision of MSME classification, support provided to MSMEs, PF contribution reliefs and direct tax measures.
Revision of MSME Classification
The low threshold in MSME definition has created a fear among MSMEs of losing out on the benefits and hence killing the urge to grow. There has been a long-pending demand for revisions. The distinction between the manufacturing sector and the services sector under the MSME definition has been removed. The following is the revised MSME classification, where both the investment and annual turnover to be considered for defining MSME.
|Revised MSME Classification|
|< Rs.1 crore
< Rs.5 crore
|< Rs.10 crore
< Rs.50 crore
|< Rs.20 crore
< Rs.100 crore
Emergency Credit Line to Businesses/MSMEs
- The credit line limit is increased to 20% of the entire outstanding credit as of 29 February 2020.
- Businesses with outstanding borrowings up to Rs.25 crore and turnover up to Rs.100 crore are eligible for this scheme.
- The loan tenure is four years with a moratorium of 12 months on principal repayment and interest to be capped.
- 100% credit guarantee cover to banks and NBFCs on principal and interest.
- The scheme can be availed till 31 October 2020.
- No guarantee fee and no fresh collateral.
- 45 lakh units can resume business activity and safeguard jobs.
Debt for Stressed MSMEs
- Central Government will facilitate the provision of Rs.20,000 crore as subordinate debt for the benefit of two lakh MSMEs.
- Functioning MSMEs with NPAs or are stressed will be eligible for this scheme.
- The government will provide a support of Rs.4,000 crore to Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) and CGTMSE will provide partial Credit Guarantee support to banks.
- The promoters of the MSME will be given debt by banks, which will then be infused by the promoter as equity in the Unit.
Equity Infusion for MSMEs Through Fund of Funds (FoF)
- Fund of Funds with a corpus of Rs.10,000 crore will be set up.
- Will provide equity funding for MSMEs with growth potential and viability.
- Fund structure will help leverage Rs.50,000 crore of funds at daughter funds level.
- The government will help to expand MSME size as well as capacity.
- Will encourage MSMEs to get listed on the main board of Stock Exchanges.
Limiting Global Tenders
- Indian MSMEs and other companies have often faced unfair competition from foreign companies.
- Therefore, Global tenders will be disallowed in government procurement tenders up to Rs.200 crore.
- This leads to Self-Reliant India (Aatmanirbhar Bharat) and support Make in India. Also, helps MSMEs to increase their business.
Other Measures for MSMEs
- E-market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
- Fintech will be used to enhance transaction-based lending using the data generated by the e-marketplace.
- The government has been continuously monitoring settlement of dues to MSME vendors from the government and Central Public Sector Undertakings.
- MSME receivables from the government and CPSEs to be released in 45 days.
EPFO Support for Business and Workers
- Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), contributions of 12% by the employer and 12% by the employee were made into EPF accounts of eligible establishments.
- This support was provided earlier for March, April and May 2020. Now, this support will be extended by another three months – June, July and August 2020.
- This will provide liquidity relief of Rs.2,500 crore to 3.67 lakh establishments and for 72.22 lakh employees.
Reduction in EPF Contribution
- To provide a higher take-home salary to the employees, the statutory PF contribution of both the employer and employee will be reduced to 10% each from the existing 12% for the next three months.
- This scheme will be applicable for workers who are not eligible for 24% EPF support under PMGKY and its extension.
- Central Public Sector Enterprises (CPSEs) and State PSUs will continue to contribute 12% as employer contribution.
- This will provide relief to about 6.5 lakh establishments and about 4.3 crore employees.
- This move provides liquidity to employers and employees over three months to a tune of Rs.6,750 crore.
Reduction in TDS/TCS Rates
- The TDS rates for non-salaried specified payments made to residents and TCS rates for the specified receipts shall be reduced by 25% of the existing rates. (For example, if the existing rate is 10%, then the revised rate will be 7.5%)
- This covers payment for a contract, professional fees, interest, rent, dividend, commission, brokerage, etc., and shall be eligible for this reduced rate of TDS.
- This reduction shall be applicable for the remaining part of the FY 2020-21, i.e. from 15 May 2020 to 31 March 2021.
- This measure ensures liquidity of Rs.50,000 crore.
Other Direct Tax Measures
The following are the various due date extensions:
|Description||Original Due Date||Revised Due Date|
|Income tax returns which are not liable for tax audit||31 July 2020||30 November 2020|
|Income tax returns which are liable for tax audit||31 October 2020||30 November 2020|
|Tax audit report||30 September 2020||31 October 2020|
|The assessments which are getting barred on||30 September 2020||31 December 2020|
|The assessments which are getting barred on||31 March 2021||30 September 2021|
|Vivad se Vishwas Scheme||30 June 2020||31 December 2020|
Also, all pending refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership, LLP and co-operatives shall be issued immediately.
For any clarifications/feedback on the topic, please contact the writer at email@example.com
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.