Atmanirbhar Bharat gives booster shots for MSMEs

The much talked about economic stimulus, which Prime Minister Narendra Modi termed as “Atmanirbhar Bharat” which spoke about ₹ 5.94 lakh crore liquidity support for various sectors with special focus on Micro, Small and Medium Enterprises (MSME) was revealed by the Finance Minister Nirmala Sitharaman on Wednesday.

As the saying goes, the devil lies in detail, the Prime Minister’s announcement of special economic package, titled ‘Atmanirbhar Bharat Abhiyan’ (Self Reliant India Campaign), amounting ₹20 lakh crore which is almost equal to 10 per cent of India’s GDP (Gross Domestic Product), received a mixed response.

Sitharaman unveiled the first tranche of measures comprising 16 steps for employees-employer, power distribution companies (DISCOMS), real estate, contractor, direct tax assesses beside MSMEs.

Six measures for MSMEs

The Finance Minister listed six measures for MSMEs which included easier credit and equity infusion and redefining these units. Sitharaman estimated that this package will help 45 lakh units to resume business activity and safeguard jobs.

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Extending the financial support, government will facilitate provision of ₹20,000 crore as subordinate debt. Sitharaman said that this will help especially those MSMEs which are having stressed account or NPA (Non-Performing Assets) but functioning. Here Government will provide a support of ₹ 4,000 crore to Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) which in turn ensure partial Credit Guarantee support to Banks. Promoters of the MSME will be given debt by banks, which will then be infused by promoter as equity in the Unit. It is estimated to benefit nearly two lakh units.

In order to provide equity funding for MSMEs with growth potential and viability, there will Fund of Funds (FoF), which will be operated through a Mother Fund and few daughter funds. Fund structure will help leverage ₹ 50,000 cr of funds at daughter funds level. It will help to expand MSME size as well as capacity. Such an initiative will encourage MSMEs to get listed on main board of Stock Exchanges.

The government has also decided to change not only the basic definition of MSME but also end the difference between manufacturing and services sector. Now the definition will have investment and annual turnover as criterions. Accordingly, units having investment less than ₹ 1 crore and turnover less than ₹5 crore will be called Micro units. Investment between ₹ 1and ₹ 10 crore and turnover of ₹ 5 crore to ₹ 50 crore will be categorised as Small Enterprises. Units having investment between₹10 crore but up to ₹ 20 crore and turnover between ₹ 50 crore and ₹100 crore will now be known as Medium Enterprises.

On EPF, Sitharaman said that units with up to 100 employees (out of which 90 per cent with salary of ₹15,000 per month) will continue to get government’s support for payment of 12 per cent of employer and 12 per cent employee contributions. Under Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12 per cent of employer and 12 per cent employee contributions was made into EPF accounts of eligible establishments. Earlier, this was provided March, April and May and now it will be for June, July and August, too.

For, other industrial units, statutory PF contribution of both employer and employee will be reduced to 10 per cent each from existing 12 per cent each for all establishments covered by EPFO for next 3 months. This will not be applicable for Central and States PSUs.

For NBFCs, she said there will be two funds to provide liquidity support to them -- ₹30,000 crore Special Liquidity Scheme and ₹ 45,000 crore partial credit scheme. Sitharaman expect this will also benefit MSMEs as credit flow will improve. For power distribution companies (DISCOMS), it has been decided to provide ₹ 90,000 crore which be provided by Power Finance Corporation and Rural Electrification Corporation against receivables.

For taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts will be reduced by 25 per cent of the existing rates, she said adding this will be applicable on payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc. for the remaining part of the FY 2020-21 -- between May 14 and March 31, 2021. This measure will release Liquidity of ₹50,000 crore.

It has also been decided to extend the due date of all income-tax return for FY 2019-20 (Assessment Year 2020-21) to November 30 from July 31 (individual) October 31 (businesses).

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