Highlights on Measures for MSMEs, EPF and Taxes under Atmanirbhar Bharat Abhiyan 2020

Prime Minister Narendra Modi addressed the nation on 12 May 2020 and since then the Atmanirbhar Bharat Abhiyan 2020 or Self-Reliant India Movement is in the talks globally. It includes the measures for micro, small and medium enterprises (MSMEs), Employee Provident Fund (EPF), HFCs / MFIs / NBFCs, power sector, real estate, contractors, and direct tax measures. Thus the 5 pillars of Atmanirbhar Bharat are – Economy, Infrastructure, System, Vibrant Demography, and Demand.

This special economic and comprehensive package of Rs 20 lakh crores which is equivalent to 10% of India’s GDP would bring the Strong reforms in various sectors and that will drive the country to self-reliance. One of the most important points here is that it is time to speak for our local products not just nationally but at a global level.


New Definition

Finance Minister Nirmala Sitharaman presented her Economic Package on 13 May 2020 said that the definition of an MSME is being revised, the investment limit has been raised and an additional criterion of turnover was introduced and the distinction between the manufacturing and service sector was also eliminated.

As per the MSME Act 2006, the MSMEs are classified into two categories; the manufacturing and service sectors.

In February 2018, the Union Cabinet chaired by the Prime Minister Shri Narendra Modi approved a change in the definition of the MSMEs. Now MSMEs will be defined on the basis of ‘annual turnover’ instead of investment in the plant, machinery, and equipment.

As per an article, the change of definition is likely to improve the ease of doing business for MSMEs, and in the process, make it easier for them to pay taxes, attract investments and create more jobs. The Finance Minister said that the change in the definition would be beneficial to the MSME and would make it possible for them to grow in size and get benefits.

existing and revised definition of msmes

Key Highlights about MSMEs

  • The central government will provide collateral-free loans worth 3 lakh crore to facilitate MSMEs. These loans will have 4 years’ tenure and will get a moratorium of 12 months. By this, approximately 12 crore workers would be benefited.
  • Subordinate Debt-based scheme is introduced worth Rs. 20,000 Crore for Stressed and NPA MSMEs. Around 2 lakh stressed and NPA MSMEs would be benefited
  • The scheme has declared Rs. 50,000 crore of equity infusion into those who have potential and are doing viable business.
  • Government procurement tenders up to 200 crores will no longer be on the global tender group.
  • It provides the extension of Registration and Completion Date of Real Estate Projects under RERA
  • E-market linkage would be provided across the board in the absence of trade fairs to promote e-commerce. Within 45 days, CPSEs and Govt. of India will clear their receivables.

Collateral-free Automatic Loans

MSMEs would require additional funds for liabilities, raw material, and jump-start the business due to the underlying impact of COVID 19. Rs 3 lakh crores Collateral-free Automatic Loans would be provided for such businesses. The scheme can be availed till 31st Oct 2020. It is expected for 45 lakh units to resume the business activity and safeguard the jobs.

  • Businesses/MSMEs would get the emergency Credit Line from Banks and NBFCs up to 20% of their entire outstanding credit as on 29th Feb 2020
  • The eligible for this scene is the borrowers with up to an outstanding of Rs. 25 crores and the turnover of Rs. 100 crore
  • Loans with the 4-year tenure and the  moratorium of 12 months on principal repayment
  • The interest would be capped
  • The scheme also includes the 100% credit guarantee cover to Banks and NBFCs on the principal and interest

Subordinate Debt

Banks will provide the Subordinate debts of Rs 20,000 crores to the Promoters of the stressed MSME. This will then be infused by the promoter as equity in the Unit under the Atmanirbhar Bharat Abhiyan.

  • The number of MSMEs expected to benefit are Two lakh
  • The eligible functioning MSMEs are the ones which are NPA or are stressed
  • The government will provide a support of Rs. 4,000 Cr. to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
  • CGTMSE will provide the support of partial Credit Guarantee support to Banks

Equity infusion

The extreme shortage of equity is an issue with the MSMEs.

  • Equity infusion through the Fund of Funds with the Corpus of Rs 10,000 crores will be provided by the government
  • This provided equity funding will come with growth potential and viability.
  • A Mother Fund and few daughter funds will run the Fund of Funds.
  • The leverage of Rs 50,000 crores of funds at daughter funds will be supported by the structure of the fund.

This will help the MSME to expand its size and the capacity and MSMEs will be uplifted to get listed on the main board of the Stock Exchanges.

Global tenders

Global tenders will not be permitted up to Rs 200 crores in the Government procurement tenders.

  • Resultantly, the significant amendments will be put into practice to the General Financial Rules.
  • This takes us towards the Atmanirbhar Bharat and to encourage the Make in India.
  • In turn, will help the Indian MSMEs to expand its business.
Atmanirbhar Bharat Abhiyan

MSME Marketing and Liquidity

Because of the global pandemic of COVID 19, the MSMEs faced severe marketing and liquidity issues.

  • The e-market linkage for MSMEs would be in the form of the trade fairs and exhibitions. It will be promoted to replace them
  • In order to expand the transaction-based lending, the growth of Fintech with the help of data generated by the e-marketplace would be implemented
  • The settlement dues of the MSMEs are being assessed in a continuous manner by the government and the receivables from Central public sector enterprises (CPSEs)and government would be released in 45 days


EPF Support

It is not easy for the businesses to restart after the COVID 19, so an EPF support of Rs 2500 crore has been included in the scheme of Atmanirbhar Bharat Abhiyan for three months to the business and workers.

  • For the enterprises which were eligible, 12 % each of employer and employee payment contribution was done in the EPF accounts. This was given for the Salary months of March, April, and May 2020.
  • The extension will be done for further 3 Salary months to salary months of June, July and August 2020
  • This scheme would provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees.

EPF contribution

For the production speedup in the next quarter, to provide more take-home salaries to the employees and to give relief to employers in payment of Provident Fund dues, the statutory PF contribution of both employer and employee would be decreased from 12 % to 10% for all the enterprises for next 3 months, for the ones which are covered by the EPFO. However, CPSEs and State PSUs will be at 12% as the employer contribution.

This will provide liquidity of Rs 6750 Crore to employers and employees over 3 months.

  • This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension.
  • 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees would get the relief under this measure.

Liquidity through TDS/TCS rate reduction

This particular measure will provide the liquidity of Rs. 50000 crore.

  • The rates of Tax Deduction at Source (TDS) for the non-salaried specified payments which are made to residents and Tax collection at Source for the specified receipts would be reduced by 25% of the current rates, this is to facilitate more funds to the taxpayers.
  • Contract, professional fees, interest, rent, dividend, commission, brokerage, etc are other eligible payments under this reduced rate of TDS.
  • This is applicable for the Financial Year 2020-21 i.e. till 31st March 2021.

Other Direct Tax Measures

  • Under the scheme, it has been declared that the pending tax refunds would be issued immediately to charitable trusts,  noncorporate businesses & professions, proprietorship, partnership, LLP and Co-operatives.
  • The Due date will be extended from 31st July 2020 & 31st October 2020 to 30th November 2020 for all the taxpayers for filing the Income-Tax Return for FY 2019-20
  • Similarly, the tax audit has been extended from the 30th of September 2020 to 31st October 2020.
  • Date of assessments getting barred on 30th September 2020 extended to 31st December 2020
  • Similarly, those getting barred on 31st March 2021 will be extended to 30th September 2021.
  • Also, the date extension for filing the GST returns is to end of June 2020
  • It has been declared to provide 24*7 custom clearance till 30th June 2020

The government is holding out a huge helping hand to make the business keep running and which in turn would uplift the nations. It is our responsibility too, to support the Make in India.

With all these measures under schemes of the Atmanirbhar Bharat Abhiyan, PayKun is here to support in this crisis and grow with the digital payments with or without websites.

Stay safe, the COVID 19 war is not yet over, maintain Social Distancing, Stay home, Stay Safe!

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