Special Economic Package or AatmaNirbhar Bharat: 1st Phase

Hello friends, Today I’m going to explain the topic "Special Economic Package or AatmaNirbhar Bharat: 1st Phase"

You can read my previous Blogs "Coronavirus(COVID-19): Impact on Real Estate in India", "Coronavirus(COVID-19): Key Announcements on Income Tax, GST, Finance and others", "GST Framework in India" & "GST in India - An Introduction"

The Union Finance Minister Smt Nirmala Sitharaman announced the 1st Phase of the Economic Relief Package following the Public Address of the Prime Minister on 12th May 2020. The Prime Minister, announced a special economic package of around Rs 20 lakh crores, amounting to 10% of India’s GDP during his speech to Spur growth, and to build "AatmaNirbhar Bharat"

Keeping with the vision of the Prime Minister, Finance Minister made her announcement for businesses including MSMEs and emphasized that in the wake of COVID-19, there is a need for liquidity, Ease of doing business, and reducing the compliance burden and due diligence. In light of the same, she announced

16 Measure Comprising

• 6 for Micro, Small & Medium Enterprise (MSME)
• 2 for Employee Provident Fund (EPF) 
• 2 measures for Non-Banking Finance Companies (NBFCs), Housing Finance Companies (HFCs), Micro Finance Institutions (MFIs)
• 1 for The DISCOMS or Power Distribution Companies
• 1 for Contractors
• 1 for Real Estate 
• 3 for Tax Measures.

Micro, Small & Medium Enterprise (MSME)

1.  Rs. 3 lakh crores Collateral-free automatic loans for business, MSMEs

• Borrowers having outstanding up to Rs. 25 Crores and turnover of Rs. 100 crores are eligible to take credit
• The tenure of the loan would be 4 years with a moratorium of 12 months on Principal repayment.
• There will be a 100% credit guarantee cover to Banks and NBFCs on principal and interest.
• This scheme can be availed till Oct 31, 2020
• It has been clearly specified that there would not be any guarantee fee or fresh collateral requirement for availing benefit under the scheme.

2.  Rs. 20,000 crores subordinate debt for stressed MSMEs

• Rs. 20000 crores to be infused as subordinate debt for stressed MSMEs
• The government will provide Partial Credit Guarantee Support for this purpose to banks.

3.  Rs.50,000 crores equity infusion for MSMEs through funds of funds

• In order to address the issue of a severe shortage of equity in MSMEs during these tough times, The Govt. has proposed to set up Funds of Funds (FoF) with a corpus of Rs. 10,000. The corpus would provide equity funds for MSMEs with growth potential and viability. The FoF will be operated through Mother Fund and few Daughter funds.
• The fund structure will help leverage Rs. 50,000 cr. Of funds at daughter funds level. This step would help to expand MSME size as well as capacity and will also encourage listing of MSMEs on the main board of stock exchanges.

4.  Amendment to Definition of MSME

5.  Government expands the scope for global tenders for MSMEs

• Tenders up to Rs. 200 crores relating to Government procurement not be Global Tenders any more 

6.  Other Measures 

• All Central Government (CG) outstanding will be cleared within 45 Days by Government help all MSME

Employee Provident Fund (EPF)

7.  Employees Provident Fund (EPF) support for Business and Workers

• Govt. had proposed under the Pradhan Mantri Garib Kalyan Package (PMGKP), EPF payments by another 3 months i.e. June, July & August Government to pay 12%+12% i.e. each by employer and employee for wage earner below Rs. 15000 p.m. and business having less than 100 workers.

8.  Reduction in EPF contribution for the next 3 months

• The Statutory Provident Fund contribution for both Employee and Employer has been reduced from 12% to 10% for all establishments covered by EPFO (Employee Provident Fund Organisation) for Government undertaking the contribution shall remain at 12%.

Non-Banking Finance Companies (NBFCs), Housing Finance Companies (HFCs), Micro Finance Institutions (MFIs)

9.  Special Liquidity Scheme

• Rs 30000 crores for Special Liquidity Scheme; liquidity being provided by RBI. The investments will be made in both primary and secondary market transactions in the investment-grade debt paper of these institutions.

10.  Partial Credit Guarantee Scheme

• Rs 45000 crores partial credit guarantee scheme for liabilities of NBFCs/MFIs. The First 20% loss will be borne by Guarantor, i.e. GoI.

 The DISCOMS or Power Distributor Companies

11.  One time money infusion for DISCOMS

• Liquidity infusion in the DISCOMS to the extent of Rs 90000 crores in 2 equal installments. The amount could be used by the DISCOMS to pay their dues.

Contractors

12.  6 months Extension

• Give Extension up to 6 months Government contractor of Railways, Roads, other Departments, etc.

Such extension shall be given for complying with the Contract Conditions, completion of works, and other intermediary milestones. The concession period under PPE Contracts may also be extended by 6 months.

Real Estate

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

• Project Registration to be extended by 6 months; completion dates of existing projects to be extended by 6 months.
• This measure will indeed de-stress real estate developers and ensure completion of projects so that home buyers are able to get delivery of their booked house with new timelines.

Tax Measures

14.  List of Announcements

• TDS and TCS rates reduced by 25% of the existing rates. The revised rates will come into effect from 14th May 2020 and will be in effect till 31st March 2021. This relief shall not be available to a salaried and non-resident taxpayer.
• The Due dates for all ITRs (Income Tax Returns) for Financial Year 2019-2020 extended from 31st July 2020 and 31st October 2020 to 30th November 2020.
• Tax Audit for Financial Year 2019-2020 extended from 30th September 2020 to 31st October 2020.
• The period for Vivad se Vishwas Scheme has been extended to the 31st December 2020.
• Due date of 30th September 2020 for completion of assessments shall be extended to 31st December 2020. Where assessments are getting barred on 31st March 2021, it shall be extended to 30th September 2021.

15.  Rate of TDS

The reduced rate of TDS will apply on payment made for the contract, professional fees, interest, rent, dividend, commission, and brokerage income. This will be applicable between 14th May 2020 till 31st March 2021. Non-salaried specified payments made to residents, TDS rates will be reduced by 25% of the existing rates.

16.  Rate of TCS

• The rate of TCS has also been reduced by 25% of the existing rates for the period from 14th May 2020 till 31st March 2020

Thanks for reading friends, I will bring more such interesting topics related to Taxation & Updates regarding COVID-19 Impact on various Business, Sector as well as Tax implications or Tax Announcements due to COVID-19

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