In the first detailing of the mega Rs 20 lakh crore coronavirus relief package, Finance Minister Nirmala Sitharaman announced some crucial packages for the MSME sector. On Wednesday, before starting the details she gave a brief introduction over ‘Aatmanirbhar Bharat’ and its purpose of making India self-reliant. She said the Aatmanirbhar Bharat rests on five pillars, Economy, Infrastructure, Technology-driven systems, Demography, and Demand. She said the main motive will be to make local brands global.
Ms.Sitharaman said private sector employees will get a boost to their take-home salaries and small and medium-sized enterprises will be offered Rs 3 lakh crore in collateral-free bank loans. The government also changed the definition of MSMEs, recognising a larger number of businesses under the segment that can avail the benefits.
1. The finance minister said, “We have a responsibility toward the poor, the needy, the migrants and the disabled.” The Prime Minister already announced that the package will be 10% of India’s GDP which will focus on “Atma Nirbhar Bharat” or “self-reliant India”.
2. The government will help the stressed businesses through two debt and equity funds amounting to Rs 70,000 crore. Ms Sitharaman further claims the government aims to help 45 lakh businesses by October by providing credit guarantees to help them access collateral-free loans from banks.
3. Changing the definition of MSMEs, the government said micro units with investment till Rs 1 cr, turnover up to Rs 5 crore. Small units with investment till Rs 10 cr, turnover up to Rs 50 cr. Medium units with investment till Rs 20 cr, turnover up to Rs 100 crore.
4. Reducing the taxes such as TCS and TDS for non-salaried service providers by 25 percent, the FM said it could increase liquidity by Rs 50,000 crore. The new rules will come into effect on May 14, 2020 through March 31, 2021.
5. Power distribution companies will get Rs. 90,000 crore via state-run power finance companies.
6. A Rs 30,000 crore special liquidity scheme for non-banking financial institutions (NBFCs) and a Rs 45,000 crore partial credit guarantee scheme for NBFCs, housing finance companies (HFCs), and microfinance institutions (MFIs) with low credit rating, was also revealed.
7. The private sector employees for the next three months will get a 2 percent relief on their contribution to the Employee Provident Fund (EPF).
8. Real estate companies will now be able to claim relief from regulatory penalties for up to six months when completion of projects is delayed because of the coronavirus, said Ms Sitharaman.
9. She further announced that the tax audit deadline has been extended to October 31, 2020 from September 30, 2020, as there is a possibility of extending the last financial year to November 30, 2020.
10. The package likely to be funded by an additional government borrowing but she refused to disclose the impact on India’s fiscal deficit. According to several private economists it could widen to over 5% GDP due to the fallout in revenue and additional spending.