Taking a cue from PM Modi’s address to the nation about self-reliance in India, finance minister Nirmala Sitharaman announced the first set of reforms for Aatma Nirbhar Bharat. Here is a short summary of the announcements-
Helping Hand for MSMEs- 6 Announcements
MSMEs form the focus of the Aatma Nirbhar Bharat mission. The MSMEs are worst hit due to the lockdown and hence Narendra Modi led government has extended a helping hand to MSMEs by giving them working capital to buy raw material and pay wages.
- Rs 3 lakh crore emergency credit line has been extended to MSMEs. The specialties include that no fresh collateral or guarantee is needed. Moreover, a 12-month moratorium is imposed on principal repayment to give more space to MSMEs. A 100% credit cover is provided which will benefit 45 lakh enterprises.
- But what about the MSMEs who are reeling under NPAs? The government will infuse Rs 20000 crore as subordinated debt. It means that a credit guarantee will be given to MSMEs through the banks. This means that the banks will give loan to stressed MSME and it can be invested as equity in the enterprise.
- A Rs 10,000 crore Fund Of Fund will be created which will invest in viable MSMEs and help them get listed on stock exchange. It will help those MSME which want to expand their business.
- MSME definition will be liberalized. MSMEs feared to outgrow as they might lose the benefits. MSME will now be defined on investment in MSME as well as turnover will also considered. The limits have been raised so that the MSMEs will continue to be classified as MSME.
- Global tenders will be disallowed in government tenders up to Rs 200 crore. This will create space for MSMEs to bid for these tenders and enhance the supply chain in India.
- E-market linkage will be provided so that MSMEs . Within the next 45 days, all the money pending to the MSMEs to be paid by central PSUs will be cleared. This will give financial stability to MSMEs.
EPFO- 2 Announcements
- Liquidity relief for all EPFO establishments. The PM Garib Kalyan Package had the provision for government paying EPFO contribution of employee till May 2020. Nearly 3.6 lakh establishments benefited from this. Now this provision is extended for next three months till August 2020. Rs 2500 crore will be infused.
- Employers can now pay statutory PF contribution of only 10%. This was 12% earlier. This will give a Rs 6700 crore liquidity relief for employers.
NBFCs, Housing Finance Companies and Microfinance Institutions- 2 Announcements
- Rs 30,000 crore special liquidity scheme under which investment will be made in NBFC, HFC and MFI. The money will be used to buy debt papers so that they will get money to carry on business. Where will this money go? NBFCs ultimately lend to MSMEs who will be the ultimate beneficiaries.
- NBFCs already got a Rs 30,000 crore partial credit guarantee for their loans. It means government stood guarantee if NBFCs are not able to pay back their borrowed money. Now the scheme is expanded to Rs 45,000 crore. Government will now stand guarantee to 20% of the loan.
Electricity Distribution Companies- 1 Announcement
- The electricity distribution companies are under debt. Emergency liquidity injection of Rs 90,000 crore in various Discoms will be made. This money will now be used by Discoms to pay their dues to generating companies. The generating companies will get money to buy raw materials to keep on producing electricity. How will common man benefit? The money received by generating companies will be passed on as a rebate to the customers.
- 6 month extension to be given to contractors for the work in roads, railways and other government work. This means the contractors will get additional 6 months to fulfill their obligations in the contracts. This will give great relief to the works going on in the country and prevent any court cases for non-fulfillment of work
- Government agencies will partially release bank guarantees in proportion to the work completed. Suppose a work is 40% complete. So the bank guarantees worth 40% of the project will be given back to contractors. This will give more money to contractors to invest in other projects
Real Estate- 1 Announcement
- Ministry of Housing and Urban Development will issue advisory to states so that regulatory authorities will be flexible to the real estate projects. The registration and completion dates for real estates can be extended by 6 months if the project was registered after 25th March 2020.
Tax Relief- 5 Announcements
- Government reduced the TDS and TCS by 25% of the existing rate for all applicable contracts, professional fee, interests, rent, dividend etc. It will release Rs 50,000 crore in the hands of the people. This will remain applicable till 31st March 2021
- All pending refunds to charitable trusts, non-corporate business, partnerships, limited liability partnerships, etc will be given immediately. This means small enterprises, MSMEs will get their due money back for spending.
- The due date for all IT returns for year 2019-20 are now extended to 30th November 2020. This will reduce the worries of tax compliance in the minds of people
- The date of assessment getting barred as on 30th September 2020 is now extended to 31st December 2020. Those debarred on 31st March 2021, will now get debarred on 30th September
- The entire Vivaad se Vishwas scheme is now extended to 31st December 2020 with no extra payment. This will give more time to settle direct tax disputes.