ROUND ONE - MSMEs BIGGEST GAINERS

We will be seeing and hearing a lot of the FM and Anurag Thakur over the next few days! After giving us a 20-minute synopsis in English and Hindi over the PM’s speech yesterday, the FM finally got down to the announcements and it lasted almost 1.30 hour.

The FM stated right at the outset that there will be 15 measures of which 6 will be for MSMEs, 2 each for Employee Provident Funds, NBFCs and MFIs; one each for discoms, realty and contractors and lastly, 3 tax related.

First the 6 measures for MSMEs:

1: Collateral free automatic loan for MSMEs with Rs.25 crore outstanding loans or annual turnover of over Rs 100 crore. This will be a 4-year tenure loan and moratorium of 10 months is being offered. No fresh collateral and no extra fee, this offer is valid till 31st Oct’20. There is also a 100% credit guarantee to banks and NBFCs on principal and interest.

2: For the stressed MSMEs, Govt to provide Rs.20,000 crore liquidity through subordinate debt-based scheme. The government will provide a support of Rs 4,000 crore to the CGTMSE which in turn will provide partial credit guarantee to banks. What this in short means is that stressed MSMEs will be given debt by the banks which will be included as equity into the company.

3: After learning about the ‘grandfathering’ clause, we now learn mother fund and daughter fund. Coined as Fund for the Funds, this will provide equity funding for the MSMEs with a corpus of Rs.50,000 crore for those who are viable and eligible. Rs.10,000 crore fund to be operated through a mother fund and few daughter funds. This is expected to help MSMEs expand capacity and eventually get listed.

4: Definition of MSMEs revised wherein investment limit is revised upwards and an additional criteria of turnover is added. Another important change - manufacturing and service-bases MSMEs to now enjoy same benefits.

5: Global tenders will be disallowed for government procurement for up to Rs 200 crore.

6: With trade fairs not seen happening over the next many months, the FM said that  
e-market linkages will be provided across the board.

7: Within the next 45 days, all receivables of MSMEs will be cleared by the GoI and CPSEs.

Employee Provident Fund measures:

1: Extension of the EPF support of up to Rs.2500 crore – it was earlier to be done till May and now it is extended into June, July and August.

2: Statutory provident fund contribution for employees not covered in the earlier announcement will be lowered for both employees and employers to 10% from 12% earlier while it will remain at 12% for PSUs.

NBFC measures:

1: A special liquidity scheme of Rs.30,000 crore for NBFCs - investment will be made in both primary and secondary market transactions in investment-grade debt of NBFCs, housing financiers and microfinance firms; securities will be fully guaranteed by the government of India.

2: Expansion of Partial Credit Guarantee Scheme for NBFCs of up to Rs 45,000 crore.

Measure for Discoms:

1: Rs.90,000 crore liquidity infusion for power distribution companies (discoms) where revenues have dropped - Power Finance Corporation and Rural Electrification Corporation to provide this liquidity through loans against state guarantee for exclusive purpose of clearing of discoms’ liabilities to the power generators. Central Public Sector Generation companies will give rebate to discoms which will be passed on to the customers.  This is a one-time liquidity infusion.

Measure for Contractors:

1: All Govt agencies like railways, roadways, will provide 6 month extension to contractors, with no cost extension to comply with obligations like completion of work covering construction and goods and services contracts.

Measure for Real Estate:

1: Developers can now invoke a Force Majuere clause under the Real Estate Registration Act (RERA) wherein registration and completion date can be extended suo-moto by six months for all projects that were expiring on or after March 25, without individual applications. Fresh project registration certifications will be issued automatically with new timelines.

Taxation measures:

1: Tax deduction at source (TDS) and tax collection at source (TCS) for specified receipts will be reduced by 25% of the existing rate – to into effect from May 14 and will last till March 31, 2021.

2: All pending refunds to charitable trusts, non-corporate business, LLPs and co-operatives will be processed immediately

3: Due dates extended:

a: All IT returns for FY20 will be extended to Nov. 30, 2020 from July 31 and Oct. 31 earlier.

b: Tax audit extended to Oct. 31 from Sept. 30 earlier.

c: Assessments getting barred on Sept. 30, 2020 has now been extended to Dec. 31, 2020. Those getting barred on March 31, 2021 will be extended to Sept. 30, 2021.