Self Reliant India - Relief Measures announced by GOI

Self-Reliant India

‘Stimulus Package’

While the entire world is suffering through the pandemic of COVID 19, India had implemented one of the biggest nation-wide lock down. This resulted to extreme economic disruption and warranted a bailout. The Government of India (GOI) has announced a package of INR 20 Lakh Crore and series of measures in continuation to earlier initial measures by RBI and announcement of extension of time lines of various compliances by Finance Ministry.

GOI has made various announcementsto provided relaxations and incentives under this‘Atmanirbhar Bharat Abhiyan’. We are hereby highlighting some of the relevant measures announced:

A] Measures for MSMEs:

1. Collateral free automatic Loans for Businesses, including MSMEs:

GOI has allocated Rs. 3 lakh crore for this measure to support badly hit businesses which needs funding for operational liability and to support re-start business. Following are the measures:

working capital finance shall be upto20% of the entire outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest.
Shall be made available to borrowers with upto Rs 25 crore outstanding and turnover of upto Rs 100 crore.
No guarantee or collateral required. Amount will be 100% guaranteed by the Government of India.
This scheme can be availed till 31 October 2020.

2. Subordinate Debt for Stressed MSMEs

This measure has been taken to support stressed MSMEs need for equity support. The measures taken are:

GOI will facilitate provision of Rs. 20,000 Crore as subordinate debt for benefit of around 2 lakh MSMEs which are functioning and NPA or are stressed.
GOIto support Rs. 4,000 Crore to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE) wherein promoters of MSMEs will be given debt which then can be infused as equity by them.

3. Equity infusion in MSME through Fund of Funds:

This measure is to support MSMEs with growth potential and viability by way of equity infusion.

GOI will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. It shall be operated through a Mother and a few Daughter funds.
It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.

4. New definition of MSMEs:

Definition of MSME will be revised by raising the Investment limit and introducing an additional criteria of turnover. The revised limits are:

Micro - Investment limit upto Rs. 1 crore and turnover upto Rs. 5 crores
Small - Investment limit upto Rs. 10 crores and turnover upto 50 crores
Medium - Investment limit upto Rs. 20 crores andturnover upto Rs. 100 crores

5. Other Measures for MSMEs:

E-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days.

6. Global tenders will not be permitted for Government procurements upto Rs 200 crores:

General Financial Rules (GFR) of the Government will be amended to disallow global tender enquiries in procurement of Goods and Services of value of less than Rs 200 crores. This will help MSMEs to increase their businesses and will support Make in India and the movement of Self-Reliant India.

B] Direct Tax measures:

The GOI has announced several measures on compliance timelines and reduction in TDS/TCS rates to ease liquidity and immediate issuances of refunds:

Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source”– The TDS rates for all non-salaried payment to residents and tax collected at source rate has been reduced by 25 percent of the specified rates for the remaining period of FY 20-21 (i.e from 14th May 2020 to 31st March, 2020.)
The due date of all Income Tax Returns for Assessment Year 2020-21 extended to 30 November, 2020.
Tax audit Report due date has been extended to 31 October 2020.
The date for making payment without additional amount under the “Vivad Se Vishwas” scheme extended to 31 December, 2020.
Date of Assessment getting barred on 30 September 2020 extended to 31 December 2020 and those getting barred on 31 March 2021 extended to 30th September 2021.
The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately.

C] Provident Fund related measures:

1. Employees Provident Fund Contribution Support for business and organised workers:

The scheme introduced as part of PMGKP under which GOI contributes 12% of salary each on behalf of both employer and employee to Employee Provident Fundaccounts of eligible establishments. The support was earlier for the month of March, April and May which is nowextended by another 3 months for salary months of June, July and August 2020.

2. EPF Contribution to be reduced for Employers and Employees for 3 months:

In order to support liquidity and relief to employers in payment of dues, the GOI has announced that statutory PF contribution of both employer and employee to be reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.

D] Measures for NBFCs, HFCs and MFIs:

1. Special Liquidity Scheme for NBFC/HFC/MFIs

In order to support NBFCs/HFCs/MFIs Government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity being provided by RBI. Investment under this scheme will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs. This will be 100 percent guaranteed by the Government of India.

2. Partial Credit Guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs

Existing Partial Credit Guarantee scheme is being revamped and now will be extended to cover the borrowings of low credit rated NBFCs, HFCs and other Micro Finance Institutions (MFIs). Government of India will provide 20 percent first loss sovereign guarantee to Public Sector Banks. This measure will result in liquidity to enable NBFCs to do fresh lending to MSMEs and Individuals.

E] Measures for DISCOMs, government Contractors and Real Estate Projects:

1. Liquidity Injection for DISCOMs

Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal instalments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.

2. 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.

3. Relief to Real Estate Projects under RERA:

State Governments are being advised to invoke the Force Majeure clause under RERA. The registration and completion date for all registered projects will be extended up to 6 months and may be further extended by another 3 months based on the State’s situation. Various statutory compliances under RERA will also be extended concurrently.

F] Corporate Law measures:

Government is working on a mission mode on next phase of ease of doing business and related reforms relating to easy registrations, fast disposal of commercial disputes and simpler tax regime to make India as one of easiest places to do business. Some of the measures announced are:

Integrated Web based Incorporation Form – Simplified Proforma for Incorporating Company Electronically Plus (SPICe +) introduced which extends 10 services of different Ministries and one State Government through a single form.
Databank of Independent Directors launched
Withdrawal of more than 14,000 prosecutions under the Companies Act, 2013.
Rationalization of Related Party Transaction related provisions.
Timely Action during COVID–19 to reduce compliance burden under various provisions of the Companies Act,2013 as well as enable Companies conduct Board Meetings, EGMs & AGMs, Rights issue by leveraging the strengths of Digital India.
Decriminalization of Companies Act violations involving minor technical and procedural defaults (shortcomings in CSR reporting, inadequacies in board report, filing defaults, delay in holding AGM).
Majority of the compoundable offences sections to be shifted to internal adjudication mechanism (IAM) and powers of RD for compounding enhanced (58 sections to be dealt with under IAM as compared to 18 earlier).The Amendments will de-clog the criminal courts and NCLT
7 compoundable offences altogether dropped and 5 to be dealt withunder alternative framework
Lower penalties for all defaults for Small Companies, One- person Companies, Producer Companies & Start Ups.
Direct listing of securities by Indian public companies inpermissible foreign jurisdictions
Private companies which list NCDs on stock exchanges notto be regarded as listed companies.

G] Insolvency and Bankruptcy Code related measures:

Minimum threshold to initiate insolvency proceedings raised to Rs. 1 Crore (from Rs. 1 Lakh) which largely insulates MSMEs
Special Insolvency resolution framework for MSMEs under Section 240A of the Code to be notified soon.
Suspension of fresh initiation of insolvency proceedings upto one year depending on the pandemic situation.
Empowering Central Government to exclude COVID 19 related debt from the definition of “default” under the Code for the purpose of triggering insolvency proceedings.

H] Public Sector Enterprise Policy measures:

With changing times demanding need for new coherent policy where all sectors are open to private sector while Public Sector Enterprise (PSEs) will play an important role in defined areas. Accordingly, government will announce a new policy whereby:

List of strategic sectors requiring presence of PSEs in public interest will be notified.
In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed.
In other sectors, PSEs will be privatized (timing to be based on feasibility)
To minimize wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized/ merged/ brought under holding companies.

Disclaimer:

The above note is subject to further study and clarifications.

This note does not form an opinion from our end and before taking any decision based on above, it is recommended to consult our experts on the subject.

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