Liquidity Booster for Domestic Industries by Government

In current scenario, maximum of MSME industries have arrived on a juncture facing big black wall, with no more funds to pump into industries. Hearing this voice, Central Government has come out with certain measures to pump liquidity into market and ease of tax compliance and filings, as detailed below:

MSME Step-1 - 20% top-up loan, on existing outstanding loan to be provided. It will not call additional colletoral, but will be covered with existing security with lenders to MSME. Those MSME having Loan upto 25crs and turnover upto 100crs will be covered in this scheme. This loan will be provided for 4 Years with a moratorium of 12 Months from availement.

MSME Step-2-  Rs. 20,000Crs will be infused as Subordinate Debt for stressed MSME thru CGTSME Trust. Government is also creating a master Fund of Fund, with infusion of  50,000crs as equity to standard and regulated MSME. It will help them to expand their capacities with less paperwork.

MSME Step-3- Definition of MSME changed has been changed with additional classification based on turnover limits (earlier it was based on investment limits). Different between manufacturing and service SME is removed. This will bring turnover limitation to micro industries, wherein their existence will be in controlled environment and boost will be for small industries categories. Wherein Atmanirbhar Bharat needed more secured environment for micro industries.

MSME Step-4- Government has provided secured domestic market to domestic industries; wherein it has banned Global Tender system upto Rs. 200 Crs Government procurement. This will provide boost to msme industries, wherein they will not have to face competition from global players and will get oxygen to survive in front of MNCs and larger corporate. Along with it, Government has also directed to clear all central government outstanding to msme, within 45 days to pump more liquidity to msme.

Labour law and EPF Step - EPF contribution was paid by Government for Covid times, March, April and May 2020. Now this payment support has been extended by another 3 Months, wherein 12%+12% contribution will be paid by Government of India.  Further employer contribution has been reduced from 12% to 10% for those organisation having more than 100 employee registered.

NBFC, MFI, HFC Step - Special Rs. 30,000crs Liquidity window will be given and government will buy debt papers of these institutions even if the same with rating as investment grade. These will be fully guaranteed by Government of India. Further government to provide Rs. 45,000 crs Liquidity to NBFC with this scheme; wherein first 20% Loss will be born by Govt of India. Even unrated papers will get money under this scheme.

Discom Liquidity Steps - Discom are not able to pay the power generation Companies, hence Rs. 90,000crs Special fund created to pay all outstanding of Power Generation Companies; wherein they will be funded thru PFC and REC.

Infra-Contractors Step – Considering lockdown non working period, government has provided an automatic extension of 6 Month to all Govt contractors of Railways, Roads, Other departments. Govt Agencies will also partially release Bank Guarantees to the extent of work completed. It’s a big step to build additional bidding networth capabilities and saving from liquidated damages and penalties.

Real-estate Industry Step - Covid19 shall be treated as act of God, using the Force Major Clause their project registration will be extended by 6 Month automatically; wherein Completion dates of existing projects to be extended automatically by 6 Months by Government authorities. It will be like providing oxygen to realestate segment, already in ventilator stage.

Direct Tax Related Step – for assessment year 2020-21, Government has extended Income Tax Return filing date to 30 November, 2020 (from existing 31^st July, 2020), tax audit date also extended to 31^st October 2020. Government has also reduced Non Salaried TDS and TCS rates by 25%, from existing slab rates. This will be effective from 14^th May 2020 will remain valid till 31^st march,2021. Further Government has directed to issue all pending refunds upto 5 Lakhs to assesses immediately.

If all these steps used with more digital mechanism, ease of business practices and opening of markets for msme, then only AtmaNirbhar Bharat can be thought of with motivated and dedicated Entrepreneurs.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com