The Prime Minister, Narendra Modi, in his national address had shared his vision of improving the livelihood of people, after covid19 lockdown.He revealed the strategy of ‘Aatmanirbhar Bharat’ (Self Reliant India) that will focus on making India self-reliant.
The first set of relief measures under the government’s ‘Atmanirbhar Bharat Abhiyan’—India’s Rs.20 lakh crore Covid-19 economic package was announced by Finance Minister Nirmala Sitharaman on May 13, 2020.
Focus areas: MSME, EPF, Non-Banking Financial Company (NBFC) and Micro finance Institutions (MFI), DISCOM, Govt contractors, Real estate sector and Tax measures.
New Definition of MSMEs
The definition of Micro, Small & Medium Enterprises (MSME) has been revised to allow MSMEs aim for expansion. There will be no distinction between manufacturing & services sector MSMEs.
The following is the revised MSME classification, where both the investment and annual turnover are to be considered.
Micro units: Investment upto Rs.1 cr and turnover upto Rs 5 crores
Small units: Investment upto Rs.10 cr and turnover upto Rs 50 cr
Medium units: Investment upto Rs.20 cr and turnover upto Rs 100 crore
Emergency Credit Line to Businesses/MSMEs
Businesses/ MSMEs that are badly hit due to covid19 lockdown may require additional funding to restart operations and meet production timelines.
- Businesses with outstanding borrowings upto Rs.25 crore and turnover upto Rs.100 crore are eligible for this scheme.
- The loan tenure is 4 years with a moratorium of 12 months on principal repayment
- 100% credit guarantee cover to banks and NBFCs on principal and interest.
- No guarantee fee and no fresh collateral.
- This scheme can be availed till 31 October 2020.
Subordinate Debt for Stressed MSMEs
Government of India will facilitate the provision of Rs.20,000 crore as subordinate debt for the benefit of two lakh MSMEs.
- Functioning MSMEs that are NPA or are stressed will be eligible for this scheme.
- Government will provide a support of Rs.4000 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)
MSMEs face a severe shortage of equity and for them to expand size, capacity and encourage them to get listed on stock exchanges, FoF is being established.
- 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.
Global Tenders upto 200 crores to be disallowed
To facilitate Indian MSMEs and other businesses to increase their business and stop unfair competition from foreign companies, global tenders in govt procurement are to be limited.
- Global tenders will be disallowed in government procurement tenders up to Rs.200 crore.
- This leads to Self-Reliant India (Aatma Nirbhar Bharat) and support Make in India.
Other Measures for MSMEs
As a replacement for trade fairs and exhibitions, E-market linkage for MSMEs are to be promoted.
Fintech will be used to enhance transaction based lending using the data generated by the e-marketplace.
The government and CPSEs shall release the payments to MSMEs in 45 days.
EPFO Support for Business and Workers
Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) scheme, contributions of 12% by the employer and 12% by the employee were made into EPF accounts of eligible establishments.
- This support will be extended by another three months – June, July and August 2020.
This measure will provide liquidity relief of Rs.2500 crore to 3.67 lakh establishments and for 72.22 lakh employees.
Reduction in EPF contribution for salaried class
The PF contribution of both the employer and employee will be reduced to 10% each from the existing 12% for the next three months, to provide a higher take-home salary for the employees
- This is 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.
A total of approximately 6.5 lakh establishments and approx 4.3 crore employees are expected to benefit, from this move.
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.
- It covers payment for a contract, professional fees, interest, rent, dividend, commission, brokerage, etc., and shall be eligible for this reduced rate of TDS.
- This provision is applicable for the remaining part of the FY 2020-21, i.e. from 15 May 2020 to 31 March 2021.
Special liquidity scheme for NBFCs, HFCs and MFIs
A Rs.30,000 crore special liquidity scheme will be launched by government for investing in investment grade debt paper of NBFCs, HFCs and MFIs.
This is an effort to provide liquidity support for these institutions and create confidence in the market.
Rs 45,000 crore partial credit guarantee scheme 2.0 for NBFCs.
To do fresh lending to MSMEs and individuals, NBFCs, HFCs and MFIs with low credit rating require liquidity.
- Existing Partial Credit Guarantee Scheme (PCGS) will be extended to cover the borrowings of lower rated NBFCs, HFCs and other Micro Finance Institutions (MFIs).
- Government of India will bear the first 20 % of the loss and be the guarantor.
Rs 90,000 crore liquidity Injection for DISCOMs
Power Finance Corporation and Rural Electrification Corporation will infuse liquidity into the Power Distribution Companies (DISCOMs) to the extent of Rs 90000 crores in two equal installments.
This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies.
Central public sector generation companies shall give rebates to DISCOMS which shall be passed on to the final consumers.
Relief to Contractors
All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give extension of up to 6 months for completion of contractual obligations, including in respect of EPC and concession agreements.
Relief to Real Estate Projects by way of extension of registration and completion dates
The Ministry of Housing and Urban Affairs will advise the state governments to treat covid19 as an event of Force Majeure under RERA and extend the registration and completion date for all registered projects upto 6 months and may be further extended by another 3 months based on the State’s situation.
In addition to it, various statutory compliances under RERA will also be extended concurrently to de-stress real estate developers and ensure completion of projects in a timely manner.
Tax measures
The due date of all Income Tax return filings will be extended from July 31 to November 30, 2020.
Vivaad se Vishwas scheme is extended till December 31, 2020.
While the date of assessments getting barred as on Sep 30, 2020 is extended to December 31, 2020 and those getting barred as on March 31, 2021 extended to September 30, 2021.
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Atmanirbhar Bharat Economic Package Set 2 Highlights: [PDF download]
Atmanirbhar Bharat Economic Package Set 3 Highlights [PDF download]
