India’s 20 Lakh Crore COVID Package to Spur Growth & Build Self-Reliant Nation
India’s 20 Lakh Crore Covid Relief Package rests on building #AtmaNirbharBhartNirman. Citing Prime Minister Narendra Modi’s vision for empowering 5 pillars of ‘Economy, Infrastructure, Tech driven Systems, Demography and Demand,’ Finance Minister Nirmala Sitharaman announced first tranche of $264 billion rescue package to spur growth & build a self-reliant India.
The FM said the focus of today’s press briefing is to facilitate factors of production with an all encompassing financial package. The 4 factors of Land, Labour, liquidity and Laws need to be eased to make local brands global. Ms Sitharaman announced 15 points to alleviate liquidity crisis, wherein 6 steps focused on MSMEs, 2 for EPFs, 2 for NBFCs, HFCs, MFIs, 1 for discoms, 1 real estate and 3 pertaining to taxation.
Lifeline for MSMEs in 6 Steps
The FM announced six steps for reviving MSME sector challenged by COVID pandemic.
The GoI announced Rs 3 lakh crore package to offer collateral-free loans for MSMEs till October 21, 2020. The lending stimulus will benefit 45 lakh units, said the FM and help the small businesses resume work and save jobs in the country. These loans will be available with a 4-year tenure and a moratorium of 12 months.
The second liquidity relief was announced for stressed MSMEs. The FM said, a subordinate debt provision of Rs 20,000 cr will be provided to estimated 2 lakh MSMEs and facilitate stressed MSMEs or those with high NPAs.
Another Rs 50,000 crore of equity infusion was announced through Mother fund-Daughter fund for MSMES that are financially stable but affected due to COVID related financial disruptions. The funding would be like a handholding step to ease the financial crunch. She further added that a fund of funds to the tune of Rs 10,000 crore will be launched to help these MSME units to expand their capacity and list on Markets, as desired.
In order to expand the benefits of the relief package to larger landscape, FM Nirmala Sitharaman redefined “MSMEs.” She said units in manufacturing & services sector will be treated equally and Investment limit is revised upwards.
Under the new anatomy, all units with investment till Rs 1 crore, and turnover up to Rs 5 crore will now be termed as micro units, the units with investment up to Rs 10 crore, and turnover up to Rs 50 crore will be termed as small units, while the units with investment up to Rs 20 crore and turnover up to Rs 100 crore will be called as medium units. This will insure larger inclusion of beneficiaries.
In order to support domestic units, the FM said that global tenders will now be disallowed to apply for government contracts up to Rs 200 crore.
As for post COVID days, FM highlighted the need for ensuring e-market linkage across the board for businesses as it seems trade fairs organisation would be difficult for some time. Further the Govt of India and PSUs will clear all the receivables in next 45 days, said FM.
A liquidity relief worth ₹2,500 crore is announced for EPF establishments as government extends EPF contribution for another 3 months till August 2021. This is estimated to benefit more than 72 lakh employees.
She added, in order to ensure more take-home salary and to give relieve employers in payment of PF, EPF contribution is reduced to 10% for Businesses & Workers for 3 months. This will infuse a liquidity support of Rs 6750 crore.
NBFCs , HFCs, MFIs
To ease liquidity crunch of lending institutions, Rs 30,000 crore liquidity scheme is announced for investing in investment grade debt paper of NBFCs, HFCs and MFIs. These debt papers will be fully guaranteed by the GoI. Further, NBFCs get Rs 45,000 crore partial credit guarantee scheme. This allows first 20% loss under the scheme to be met by the guarantor, the government of India.
The FM said DISCOMS are struggling from extreme cash crunch due to COVID Times and thus the Government is announcing Rs. 90,000 crore liquidity injection exclusively for DISCOMs.
The government has further announced provision of lending to them against state guarantees. This will be exclusively for clearing dues of power generation companies. She said a rebate will be offered to DISCOMS who pass the benefit to public.
Real Estate & Contractors
In order to relieve contractors and real estate sector, the FM announced the extension of projects construction work and goods and services contracts, for up to 6 months by all central agencies like Railways, Ministry of Road Transport and Highways, Central Public Works departments.
Urban Development Ministry will soon issue advisory for states and UTs so that respective regulators can invoke force majeure and suo moto extend completion and registration dates for six months. This benefit can be facilitated towards expiring on or after March 25, 2020.
Extending a much awaited tax relief, FM announced a reduction of 25% of applicable Tax Deducted at Source (TDS) & Tax Collection at Sources (TCS) from 14 May 2020 till March 31, 2021. This measure will leave more cash in the hands of non salaried and release Rs 50,000 crores added FM.
Further the FM announced a major shuffling on important IT dates. The Due date for filling all IT Returns is extended from July 31, 2020 to November 30, 2020 and tax audit due date is extended to 31 October 2020. The deadline for Vivaad se Vishwas scheme is postponed till December 31,2020. The date of assessments getting barred on 30th September 2020 is extended to 31st December 2020, while those getting barred on 31st March 2021 get the deadline till 30th September 2021.