Atmanirbhar Bharat – Coronavirus Economic Stimulus Package

Smt. Nirmala Sitharaman, the Hon’ble Finance Minister, announced the 20 lakhs crore Financial Aid package on 13.05.2020 called Atmanirbhar Bharat, after Prime Minister’s address of the nation on the previous day to support MSMEs in India. She emphasized that the schemes under the package were essentially framed in a manner to spur economic growth and make way for “self-reliant” India. A total of 16 relief measures were announced out of which 6 were for MSMEs, 2 related to EPF, 2 for NBFCs/HFCs/MIFs, 1 for DISCOMs, 1 for Contractors, 1 for Real Estate Sector and 3 for Direct Taxpayers.

Micro Small and Medium Sized Enterprises

Collateral Free Loans: Collateral free loans amounting to INR 3 lakhs crore have been announced. The eligibility criteria for this is that the borrower should have less than INR 25 crore outstanding and turnover of INR 100 crore.

The tenure of the loan would be 4-years with 12-months moratorium on Principal repayment. 100% credit guarantee cover will also be given to Banks and NBFCs on principal and interest. This scheme can be availed till October 31st,2020. It is expected around 45 lakh units will benefit from this.

Subordinate Debt for “Stressed” MSMEs:  Subordinate debt amounting to INR 20,000 crore shall be provided to MSMEs that are stressed or NPA. The debt will be given to promoters of MSMEs will infuse the debt amount as equity into the unit. A support of INR 4,000 crore will also be provided to CGTMSE, which will further provide partial Credit Guarantee Support to Banks. An estimated 2 lakh units will benefit from this.

Equity Infusion into MSMEs via Fund of Funds: This scheme is for MSMEs that have viability and growth potential but face shortage of equity. FoF will be set up with corpus of INR 10,000 crores. This shall be operated through a Mother Fund and few daughter funds. This is expected to leverage around INR 50,000 crore of funds at daughter fund level.

This scheme will encourage the MSMEs in getting listed on main board of Stock Exchanges and also in expansion of operations.

MSMEs redefined: The definition of MSMEs has been revised to bring more units under the purview of the schemes announced. Both – the investment and the turnover limit have been revised upwards. The distinction between service and the manufacturing sector has also been eliminated.

New MSME Classification

Following is the new classification of MSMEs:

Global Tenders

Global Tenders disallowed up to INR 200 crores:  To give more opportunities to the Indian MSMEs, global tenders up to INR 200 crores have been disallowed, thereby reducing competition.

Miscellaneous measures: The MSMEs have been majorly facing liquidity problems and to reduce the same, following measures have been introduced:

• All the MSME receivables from Government and the CPSEs will be released within 45 days.
• As a replacement for trade fairs and exhibitions, the MSMEs will be linked via e-markets.
• For enhancing the transaction-based lending generated by the e-marketplace, Fintech shall be used.

Employees Provident Fund

Extension in EPF Support for Business and Workers: As announced in the previous plan, the 12% EPF contribution on behalf of both employer and employee was bone by the Government under the Pradhan Mantri Garib Kalyan Package (PMGKP). This has been further extended for 3 months up to August now. This scheme was applicable to organizations with strength of up to 100 and whose 90% employees had salary below INR 15,000.

Reduction in EPF Contribution: To overcome the problem of liquidity, the statutory contribution PF contribution of both employer and employee has been reduced to 10% from current 12%, for all organizations covered by EPFO for the next 3 months. The CPSEs and State PSUs, shall however, continue to contribute 12% as employer contribution but the employees of these entities shall be subject to 10% contribution. This scheme will provide relief to approximately 6.5 lakh organizations.

NBFCs/HFCs/MFIs

Special Liquidity Scheme:  A special liquidity scheme of INR 30,000 crores would be launched for infusing equity in NBFCs/HFCs/MFIs. The investment under this scheme will be made in both primary and secondary market transactions in investment grade test paper. The securities under this scheme shall be fully guaranteed by the government.

Partial Credit Guarantee Scheme: NBFCS/HFCs/MFIs that have low credit rating are in need of funds for lending to individuals and MSMEs. The existing PCGS scheme has been extended to cover borrowings like issuance of Bonds/CPs. First 20% of the loss will be borne by the Government of India. The liquidity benefit of this scheme will be INR 45,000 crores.

DISCOMs

Liquidity Injection:  Liquidity injection of INR 90,000 crores shall be done for DISCOMS against receivables. Loans will also be given against State guarantees for the purpose of discharging liabilities of DISCOMs to Gencos. The Central Public Sector Generation Companies shall give rebate to DISCOMs which shall pass the benefit to the ultimate consumers.

Contractors

Relief to Contractors: All Central Agencies (like Railways, CPWD, etc.) shall provide an extension of up to 6 months without costs to any contractor. For easing cash flows, government agencies will also partially release bank guarantees to the extent contracts are partially completed.

Real Estate

Extension of Registration and Completion Date: COVID-19 shall be treated as “Force Majeure” and the registration and completion dates for all registered projects shall be suo moto extended by 6 months. Permission for further extension by 3 months has also been given by government, if needed. Timeline for various other compliances under RERA have also been extended.

Tax Measures

TDS/TCS rate reduction: The current rates of TDS/TCS have been reduced by 25% for the remaining part of FY 2020-21 till March 31^st, 2021. This will supposedly release liquidity of INR 50,000 crores.

Other measures

• Funds pending to charitable trusts ad non-corporate businesses & professions shall be issued immediately.
• Due dates for filing income tax returns extended from July 31^st, 2020 & October 31^st, 2020 to November 30^th, 2020. For tax audit, this has been extended to October 31^st2020 from September 30^th, 2020.
• Date of assessments getting barred on September 30^th2020 has been extended to December 31^st 2020 and those getting barred on March 31^st 2021 extended till September 30^th
• Period of Vivad se Vishwas Scheme for making payment without additional amount has been extended till December 31^st