In what could come as a major relief for employees and employers, Finance Minister Nirmala Sitharaman announced that the government will continue to pay the Employee Provident Fund (EPF) contribution of both the employer and employee (12% each) for another three months.
This is for companies, which have up to 100 employees, and 90% of whom draw less than Rs 15,000 per month.
And for those companies who are not eligible for this, the government has reduced the statutory PF contribution from 12% to 10% for the next three months - employees and employers only have to pay only 10%.
For Central PSUs, the FM said that employers will continue to pay 12%, while the employee will pay only 10%. With this, liquidity relief of Rs 6,750 crore will be available for the next three months, the FM said.
These announcements came as the Finance Minister Nirmala Sitharaman and MoS Finance Anurag Thakur on Wednesday addressed the media with details of the first tranche of the Rs 20 lakh crore package under the āAtma Nirbhar Bharat Schemeā that was announced by Prime Minister Narendra Modi on Tuesday.
The FM also announced a reduction of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) rates by 25% of the existing rate starting Thursday, till March 31, 2021.
This shall apply to all payments ā contracts, professional fees, interest, rent, commission, brokerage -- all will be eligible for the 25% rate reduction. This reduction will release nearly Rs 50,000 crore in the hands of the people and wonāt come in as payment for taxation.
Apart from this, the government also made several announcements for Medium, Small and Micro Enterprises (MSMEs), the real estate sector, NBFCs, among others.
In a major announcement, the government revised the definition of MSMEs, which the FM claimed was being changed in their favour. The investment limit, which defines an MSME is being revised upwards.
As per the revised MSME definition, there is a composite criteria of investment and annual turnover, where the investment criterion differed for manufacturing and service sector. Under this, the difference is being removed. An enterprise would be classified as micro if it has less than Rs 1 crore investment and a turnover of less than Rs 5 crore. Small would be those classified with investment of less than Rs 10 crore and turnover of less than Rs 50 crore. A medium enterprise would be that with an investment of less than Rs 20 crore, and turnover less than Rs 100 crore.
Collateral-free loans: For Medium, Small and Micro Enterprises (MSMEs), who couldnāt move forward because of lockdown, the Finance Minister announced collateral-free automatic loan worth Rs 3 lakh crore.
MSMEs, which have loans outstanding worth Rs 25 crore or a turnover of Rs 100 crore will benefit from this. The tenure for the loan is 4 years and the FM also announced a 12-month moratorium on principal payment. These loans will be 100% credit and guarantee-free and will be available till October 31. This is expected to benefit 45 lakh units.
Subordinate debt proposition: In a bid to help stressed MSMEs facing a problem of equity, the government will be infusing Rs 20,000 crore for stressed MSMEs. Two lakh MSMEs are likely to benefit. MSMEs, which have turned into NPAs or are stressed will be eligible. The government will be providing Rs 4 lakh crore to the credit guarantee fund trust for micro and small enterprises (CGTMSE). They will be able to provide partial support to banks.
Fund of Fund: The FM also announced Rs 50,000 crore equity infusion for MSMEs. As part of this, the government will be setting up a Fund of Funds with Rs 10,000 crore as corpus to provide funding to MSMEs with growth potential and viability.
The FM also announced that global tenders will be disallowed in govt procurement for tenders upto Rs 200 crore. This will help self-reliant units participate in Make In India as small units can participate in government purchases. Necessary changes are being made to general financial rules, the Finance Minister added.
The Finance Minister said that after COVID-19, trade fairs and exhibitions will be difficult, so the government will ensure e-market linkage across the board. āFor government and CPSEs (Central Public Sector Enterprises), where there are receivables by MSMEs, we announce that all their receivables will be cleared within the next 45 days,ā the minister said.
For NBFCs, HFCs, MFIs
Recognising that Non-Banking Financial Companies (NBFCs), Housing Finance Companies (HFCs) and Micro Finance Institutions (MFIs) were facing difficulties, the government announced a Rs 30,000 crore special liquidity scheme.
Under this scheme, investment will be made in both primary and secondary market in investment grade debt papers of NBFCs, HFCs, MFIs.
The FM said that this can impact struggling NBFCs, even those serving MSMEs and ease the flow of credit with NBFCs, who have not so good debt papers in their hand
The FM also expanded the scope of Partial Credit Guarantee Scheme for NBFCs. The existing scheme will be extended to cover borrowings such as primary issuance of Bonds/CPs (liability side of balance sheets) of such entities. The first 20% of loss will be borne by the government of India. AA rated papers and rated below that, and unrated papers will be eligible for investment
The FM said that Discoms are facing unprecedented cash flow problems, unable to pay power generating companies. To help them, she announced an emergency liquidity injection of Rs 90,000 crore, which will be infused by the Rural Electrification Corporation and Power Finance Corporation. This will be against all the receivables. The idea is to pass on the benefit to customers.
All government agencies - railways, road transport, Central Public Works, etc - will now give up to 6 months extension (to comply with contract conditions) to contractors to cover construction or goods and services contracts. Partial bank guarantee will be released by government agencies for the amount of work completed, the FM said.
The Urban Development Ministry will issue an advisory to states and UTs so that the regulatory authorities are given a clear picture that they can treat the COVID-19 period to invoke Force Majeure. They can suo moto extend the registration and completion dates by 6 months for all registered projects expiring on or before March 25, 2020. They can also issue fresh āproject registration certificatesā with revised timelines.
All pending refunds to charitable trusts and non corporate business, proprietary, professions, partnerships, LLPs shall be issued immediately.
Due date of all Income Tax returns are now extended from July 31 and October 31 to November 30. Tax audit from September 30 to October 31, 2020.
Date of assessments getting barred on September 30 is now being extended by 3 months to December 31. Those getting barred on March 31 2021 are being extended to Sept 30 2021, which is a six month extension.
āVivad Se Vishwas schemeā for making payment without additional payment extension till Dec 31