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No. 1 e - Service Plateform in India

Self-Reliant India Movement

DigitalCA
May 14, 2020

Main Package for Businesses including MSMEs

1.        Rs 3 lakh crores Collateral free Automatic Loans for Business, incl MSME

2.        Rs 20,000 crore Subordinate Debt for MSMEs

3.        Rs 50,000 cr equity infusion through MSME Fund of Funds

4.        New definition of MSMEs

5.        Global tender to be disallowed upto Rs 200 crores

6.        Other interventions for MSMEs

7.        Rs 2500 crores EPF support for Businesses and Workers for 3 more months

8.        EPF contribution reduced for Business & Workers for 3 months- Rs 6750 crores

9.        Rs 30,000 crores Liquidity Facility for NBFC/HCs/MFIs

10.      Rs 45,000 cr Partial Credit Guarantee Scheme 2.0 for NBFC

11.      Rs 90,000 cr Liquidity Injection for DISCOMs

12.      Relief to contractors

13.      Extension of Registration and Completion Date of Real Estate Projects under RERA

14.      Rs 50,000 cr liquidity through TDS/TCS reductions

15.      Other Direct tax Measures

 

Point 1:

Rs 3 lakh crores Collateral-free Automatic Loans for Businesses, including MSMEs Businesses

  • MSMEs have been badly hit due to COVID19 need additional funding to meet operational liabilities built up, buy raw material and restart business
  • Decision: Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29.2.2020
  • Borrowers with       up to Rs. 25 crore outstanding and Rs. 100 crore turnover eligible
  • Loans to have 4      year tenor with       moratorium of 12 months on Principal repayment
  • Interest to be capped
  • 100% credit guarantee cover to Banks and NBFCs on principal and interest
  • Scheme can be availed till 31st Oct 2020
  • No guarantee fee, no fresh collateral

Point No-2

45 lakh units can resume business activity and safeguard jobs. Rs 20,000 crores Subordinate Debt for Stressed MSMEs

  • Stressed MSMEs need equity support
  • GoI will facilitate provision of Rs. 20,000 cr as subordinate debt
  • Two lakh MSMEs are likely to benefit
  • Functioning MSMEs which are NPA or are stressed will be eligible
  • Govt. will provide a support of Rs. 4,000 Cr. to CGTMSE
  • CGTMSE will provide 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.

Point - 3

Rs 50,000 cr. Equity infusion for MSMEs through Fund of Funds

  • MSMEs face severe shortage of Equity.
  • Fund of Funds with Corpus of Rs 10,000 crores will be set up.
  • Will provide equity funding for MSMEs with growth potential and viability.
  • FoF will be operated through a Mother Fund and few daughter funds
  • Fund structure will help leverage Rs 50,000 cr of funds at daughter funds level
  • Will help to expand MSME size as well as capacity.
  • Will encourage MSMEs to get listed on main board of Stock Exchange

Point No 4

New Definition of MSMEs

  • Low threshold in MSME definition have created a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow.
  • There has been a long-pending demand for revisions.

Announcement:

  • Definition of MSMEs will be revised
  • Investment limit will be revised upwards
  • Additional criteria of turnover also being introduced.
  • Distinction between manufacturing and service sector to be eliminated.
  • Necessary amendments to law will be brought about.

Point No -5

Global tenders to be disallowed upto Rs 200 crores

•         Indian MSMEs and other companies have often faced unfair competition from foreign companies.

•         Therefore, Global tenders will be disallowed in Government procurement tenders upto Rs 200 crores

•         Necessary amendments of General Financial Rules will be effected.

•         This will be a step towards Self-Reliant India (आत्मनिर्भर र्ारत) and support Make in India

•         This will also help MSMEs to increase their business.

Existing MSME Classification

Criteria                  :      Investment in Plant & Machinery or Equipment

Classification

Micro

Small

Medium

Mfg. Enterprises

Investment<Rs. 25 lac

Investment<Rs. 5 cr.

Investment <Rs. 10 cr.

Services

Enterprise

Investment<Rs. 10 lac

Investment< Rs. 2 cr.

Investment<Rs. 5 cr.

Revised definition of MSME

Revised MSME Classification

Composite Criteria                                     :     Investment And Annual Turnover

Classification

Micro

Small

Medium

 

Manufacturing

& Services

Investment< Rs. 1 cr.

and

Turnover < Rs.5 cr.

Investment< Rs. 10 cr.

and

Turnover < Rs.50 cr.

Investment< Rs. 20 cr.

and

Turnover < Rs.100 cr.

 

Point No 6:

Other interventions for MSMEs

  • MSMEs currently face problems of marketing and liquidity due to COVID.
  • e-market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
  • Fintech will be used to enhance transaction based lending using the data generated by the e-marketplace.
  • Government has been continuously monitoring settlement of dues to MSME vendors from Government and Central Public Sector Undertakings.
  • MSME receivables from Gov and CPSEs to be released in 45 days

Point No 7

Rs. 2500 crore EPF Support for Business & Workers for 3 more months

  • Businesses continue to face financial stress as they get back to work.
  • Under Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of employer and 12% employee contributions was made into EPF accounts of eligible establishments.
  • This was provided earlier for salary months of March, April and May 2020
  • This support will be extended by another 3 months to salary months of June, July and August 2020
  • This will provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees.
  • EPF contribution reduced for Business & Workers for 3 months- Rs 6750 crores Liquidity Support
  • Businesses need support to ramp up production over the next quarter.
  • It is necessary to provide more take home salary to employees and also to give relief to employers in payment of Provident Fund dues,
  • Therefore, statutory PF contribution of both employer and employee will be reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.
  • CPSEs and State PSUs will however continue to contribute 12% as employer contribution.
  • This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension.
  • This will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees.
  • This will provide liquidity of Rs 6750 Crore to employers and employees over 3 months.