Businesses including MSMEs under Atamnirbhar Bharat - the way forward
The paper is highlighting the salient features of Atamnirbhar Bharat package announced on 13.05.2020, to facilitate and promote Businesses including MSMEs.
Business Enterprises majorly consist of the Micro, Small and Medium Enterprises. MSMEs contribute 29% to the GDP and have created 11 crore jobs till now. The Micro, Small and Medium Enterprises Development Act, 2006 deals with the facilitation, promotion and development of micro, small and medium enterprises.
The package proposes to revise the definitions of MSMEs by raising the investment limit. An additional criteria of “turnover” along with “investment in plant and machinery” for manufacturing enterprises and “investment in equipment” for enterprises rendering services will be added. Earlier there were separate criteria’s for manufacturing and service sector, as per the announcement, the separation between manufacturing and service sector will be eliminated.
As per the Ministry of Micro, small and medium enterprise Gazette notification dated 1st June, 2020
S.O. 1702(E).—In exercise of the powers conferred by sub-section (1) read with sub-section (9) of section 7 of the ‘Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) and in supersession of the notification of the Government of India, Ministry of Small Scale Industries, dated the 29th September, 2006, published in the Gazette of India, Extraordinary, Part II, Section3, Sub-section(ii), vide S.O. 1642(E), dated the 30th September 2006 except as respects things done or omitted to be done before such supersession, the Central Government, hereby notifies the following criteria for classification of micro, small and medium enterprises, namely:
A micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
A small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
A medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
Business enterprises (up to Rs 100 crore of turnover) and outstanding loans (up to Rs.25 crore) as on 29.02.2020 can avail 20% loan of their entire outstanding loan. The business enterprises shall be entitled to receive 100% of credit guarantee cover by the government on the availed loan. This loan would be with concessional rates. https://pib.gov.in/PressReleasePage. aspx?PRID=1623601
2) Subordinate Debt
The Government of India will facilitate Rs.20,000 cr. as subordinate debt to two Lakh MSMEs which are NPA or are stressed. Government will support stressed MSMEs with 4000 cr. through Credit Guarantee Fund Trust for MSMEs (CGTMSE), which makes available collateral free credit to MSMEs. Banks are expected to provide the subordinate debt to promoters of such MSMEs equal to 15% of their existing stake in the unit subject to a maximum of Rs.75 lakhs. https://pib.gov.in/PressReleasePage. aspx?PRID=1623601
3) Fund of Funds
Government will set up a Fund of Funds with a corpus of Rs.10,000 cr. to provide equity funding for MSMEs with growth potential and viability. The Funds of Funds 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 funds of funds will be able to mobilise equity of about Rs.50,000 cr.
This is a form of venture capital i.e equity financing or funding of an enterprise with growth potential and viability. The government hopes that this equity of Rs.10,000 cr. can be in a position to invest in further ventures to an extent of Rs.40,000 cr.
https://pib.gov.in/PressReleasePage. aspx?PRID=1623601
4) Global Tenders
Rule 161(iv)- Global Tender Enquiry (GTE) of General Financial Rules (GFRs) 2017 has been amended to the effect that “no Global Tender Enquiry (GTE), however, shall be invited for tender upto Rs.200 cr. or such limit as may be prescribed by the department of expenditure from time to time”. Uptill a tender of Rs.200 cr. there will be no foreign bidder resultantly more opportunity for MSMEs.
https://msme.gov.in/sites/default/files/ AmendmentinGeneralFinancialRules2017 -GlobalTenderEnquiry.pdf
5) EPF Support for business and workers
Gazette Notification dated 18.05.2020 of Ministry of labour and employment, Government in exercise of its power u/s 6 of Employees Provident Funds and Miscellaneous Provisions Act, 1952 has amended the Act. It has cut employees’ provident fund (EPF) contributions to 10% from the existing 12% for three months May, June and July. This would increase 4.3 crore organised sector employee’s take home pay.
Government-owned entities and their employees, both at the Centre and the states will continue to contribute 12% each towards EPF.
Under Pradhan Mantri Garib Kalyan Package (Insurance scheme for health workers fighting Covid-19) (PMGKY), Government of India will contribute 12% of salary each on behalf of both employer and employee towards EPF for six wage months from March to August for establishments having less than 100 employees and 90% of them earning less than Rs.15,000/- a month.
https://www.epfindia.gov.in/ site_docs/PDFs/Circulars/Y2020- 2021/GN_for_reduction_in_EPF_ contribution_rate.pdf
6) Force Majeure
Vide Office memorandum dated 13.05.2020 of the Ministry of Finance, relief to contractors has been given by extending up to six months of completion of contractual obligations, including in respect of Engineering, Procurement and Construction (EPC) and concession agreement. This is applicable to the contracts and PPP contracts with government agencies. The contractual obligations which have to be completed on or after 20.02.2020 shall stand extended for a period not less than three months and not more than six months without imposition of any cost or penalty on the contractor.
https://doe.gov.in/sites/default/files/ Force%20Majeure%20Clause- %20FMC%20.pdf
7) Tax relief to business
Pending income tax refund to charitable trust and non-corporate businesses and professions to be issued immediately.
The Ministry of Finance has posted on 13.05.2020, Reduction in rates of Tax deducted at source (TDS) and tax collected at source by 25% from 14.05.2020 to 31.03.2021, legislative amendment shall be proposed in this regard.
Due date of all income tax returns will be extended to 30th November 2020. Similarly tax audit due date will be extended 31th October 2020. The date for making payment without additional amount under “Vivat” se “Vishas” scheme will be extended till 31 December 2020.
https://pib.gov.in/PressReleasePage. aspx?PRID=1623745
Advocate Ayushi Chugh For Lex Locum Consultants LLP
