Atma-nirbhar Bharat Abhiyaan has made headlines across the globe and has come as part of a major economic relief package to assuage India’s economic predicament amidst the pandemic. Combined with all previous economic stimulus efforts, the total amount of the relief package comes to a whopping Rs. 20 lakh crore. 

The package involves fiscal policy and relief measures for various industries as the economic ramifications of the pandemic have left no sector untouched. With great emphasis on MSME revival, tax relief measures and EPF support, the Finance Minister is expected to elaborate on the relief measures in the days to come.

Here’s a rundown of the relief measures, and what they mean for the economy.

New MSME Definition 

As a part of the relief measures under Atma-nirbhar Bharat Abhiyaan, the definition of Micro, Small and Medium Enterprises has been altered with the aim of providing them greater support and benefits. The earlier definition of MSMEs was based on investments in plants and machineries or equipment. In contrast, MSMEs will now be defined in a composite manner, taking both investment and turnover into account.

Revised MSME Classification

Classification  Micro Small  Medium
Investments

and 

Turnover 

< Rs.1 crore

and

< Rs.5 crore

< Rs.10 crore

and

< Rs.50 crore

< Rs.50 crore

and

< Rs.250 crore

 

Read more about the change in this article

Emergency Credit Line for MSMEs

In order to provide additional funding to kickstart operations once again, the government has decided to provide Rs. 3 lakh crores in collateral-free automatic loans to MSMEs. 

  • This Emergency Credit line will be given by banks and NBFCs for an amount up to 20% of the MSME’s entire outstanding credit as on 29th February 2020.
  • Borrowers with a turnover of up to Rs. 100 crore and an outstanding credit of up to Rs. 25 crore are eligible for obtaining credit under this scheme
  • The loans will be given for a tenure of 4 years, and there will be a moratorium of 12 months on principal repayment
  • The interest rate will be capped and the MSME will not be required to produce any additional collateral or guarantee
  • 100% credit guarantee cover to banks and NBFCs on principal and interest

The scheme can be availed until 31st October 2020. Its benefits are expected to aid 45 lakh business units across the country. 

Debt and equity infusion for MSMEs 

In addition to the Emergency Credit Line, the government will provide additional subordinate debt of Rs.20,000 crores under Atma-nirbhar Bharat Abhiyaan.

  • MSMEs that are functioning but categorised as NPA or are stressed, are eligible for benefits under this scheme
  • The government will provide Rs.4,000 crore to Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which will, in turn, provide partial credit guarantee to banks
  • Banks will provide debt to MSME promoters, who can, in turn, infuse the money as their equity in the enterprise

The government will also be providing equity funding to MSMEs with growth potential through a Fund of Funds, having a corpus of Rs.10,000 crore. 

  • The Fund of Funds will function through a Mother fund and multiple Daughter funds
  • The structure of the fund will help leverage Rs.50,000 crore at the daughter funds level 

The fund will help MSMEs upscale and potentially get listed on Stock Exchanges.

Limitation on Global Tenders

The government has announced that global tenders will be disallowed in government procurement tenders up to Rs.200 crore. This, in turn, will warrant amendments to the General Financial Rules. This comes as a measure to protect Indian ventures from foreign competition and boost the agenda of ‘Make in India’ and self-reliance (Atma-nirbhar Bharat).

EPF support to workers and businesses

To provide financial relief to businesses during the Coronavirus crisis, the government has decided to continue support to EPF contributions for businesses and their workers for 3 more months. 

  • The relief measure was announced in the month of April to fund EPF contributions for 3 months i.e. from March to May – both by the employer and the employee- a total of 24% of wages. The employees working in an establishment having less than 100 workers were eligible for such relief 
  • The scheme has now been extended till August 2020 and will provide liquidity relief of Rs.2,500 crore to 3.67 businesses and 72.22 lakh employees across the country. 

Reduction in EPF contribution

To increase the take-home salary for salaried employees, the statutory PF contribution of both the employer and employee will be reduced to 10% each from the current 12% for the next 3 months 

  • This scheme will be applicable to employees who are not covered under 24% EPF support mentioned earlier
  • However, central public sector enterprises and state PSUs will continue to contribute 12% as their employer contribution 
  • This measure will provide relief to about 6.7 lakh businesses and 4.3 crore employees

Reduction in TDS/TCS rates

  • The TDS rates for non-salaried payments made to residents individuals and TCS rates have been reduced by 25% of the existing rates.  For instance, if Mr A is to receive bank interest of Rs.20,000, then at the current TDS rate of 10%, the bank would have deducted TDS Rs.2,000. But, the TDS rate has been reduced by 25% i.e. effective rate of 7.5%, the bank will only deduct TDS of Rs.1,500. This will provide additional liquidity of Rs.500 to Mr A
  • The reduced rates will be applicable for the remaining part of FY 2020-21 i.e. from 15th May 2020 to 31st March 2021. This relief ensures liquidity of about Rs.50,000 crores 

You can check out the reduced TDS and TCS rates here

Amendments related to direct tax

  • The due date for filing income tax returns for the taxpayers eligible for tax audit in FY 2019-20 has been extended to the 30th November 2020 from the 31st October 2020. Similarly, for taxpayers not eligible for tax audit, the due date has been extended to the 30th November 2020 from 31st July 2020
  • The due date for filing tax audit form for FY 2019-20 has also been extended to the 31st October 2020 from the 30th September 2020
  • The government has announced that all pending tax refunds of small businesses, professions and charitable trust will be issued immediately  

You can read the details of the economic package announced for MSMEs in the month of April here. We will keep you posted with any further announcements from the government on Atma-nirbhar Bharat Abhiyaan

Till then, stay safe!

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A Writer by Chance. Finance Wizard. If not working, you can find me binge-watching F.R.I.E.N.D.S!

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