Finance minister Nirmala Sitharaman on Wednesday 13th May, unveiled a Rs.5.9 lakh crore stimulus package which includes Rs.3 lakh crore collateral-free loans to small businesses, Rs.75,000 crore liquidity infusion in non-banking finance companies (NBFCs), Rs.90,000 crore financial support to power discoms and Rs.50,000 crore cash in the hands of taxpayers.
The allocation is part of the Rs.20 lakh crore ‘Atmanirbhar Bharat Abhiyan’ (Self-Reliant India Movement) announced by Prime Minister Narendra Modi on 12th May that combines policy reforms with fiscal and monetary measures.
Sitharaman said the focus of the measures announced on Wednesday is “getting back to work”. The fiscal and policy support will enable employees and employers, businesses, especially micro, small and medium enterprises (MSMEs), to get back to production and workers back to gainful employment, she said.
Rs.3 lakh crore emergency working capital facility is provided to businesses in the form of term loans at a concessional rate of interest. This will be available to units with up to Rs.25 crore outstanding and turnover of up to Rs.100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the federal government benefiting more than 4.5 million MSMEs.
Besides, the government announced five other measures to support MSMEs – Rs.20,000 crore subordinate debt-based scheme for stressed MSMEs, setting up a Rs.50,000 crore ‘fund of funds’ with a corpus of Rs.10,000 crore, redefining MSMEs to allow growth of units, disallowing global tenders up to Rs.200 crore in all government purchases and providing e-market linkage to boost sales.
In order to infuse liquidity in the system, particularly for small businesses and rural sector enterprises, the government announced a Rs.30,000 crore special liquidity scheme for NBFCs, housing finance companies (HFC) and micro-finance institutions (MFIs).
Tax Reliefs
Tax reliefs to businesses and individual taxpayers, which included expeditious income tax refunds to charitable trusts, non-corporate businesses, proprietorship, partnership, limited liability partnership (LLP) and cooperatives.
The rates of tax deduction at source (TDS) and tax collected at source (TCS) has now been reduced for all non-salaried payment by 25% of the specified rates for the remaining period of FY 2021, which will provide liquidity to the tune of Rs.50,000 crore.
In order to reduce tax compliance burdens, the due date of all income-tax returns for assessment year 2020-21 will be extended to November 30, 2020, she said. The date for making payment without additional amount under the ‘Vivad se Vishwas’ scheme will be extended to December 31, 2020, she added.
Employees Provident Fund (EPF)
Sitharaman extended the three-month employees provident fund (EPF) support given to small businesses and organised workers to check retrenchments by another three months up to August 2020.
The scheme, launched on March 26, provides for government’s contribution in 12% of salary each on behalf of both employer and employee to EPF in enterprises employing fewer than 100 pople with 90% earning less than Rs.15,000 a month. This involves 7.2 million employees and will benefit them to the tune of about Rs.2,500 crore.
Besides, she announced reduction in statutory provident fund contributions of both employers and employees (in companies other than those benefiting from the other EPF incentive) to 10% each from existing 12% for all establishments covered by Employees Providend Fund Organisation (EPFO) for the next 3 months. “This will provide liquidity of about Rs.6,750 crore,” she said.
Real Estate
The registration and completion date for all registered projects will be extended up to six months and may be further extended by another 3 months based on the state’s situation.
Contractors involved in public sector projects have been given additional time. All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give extension of up to 6 months for completion of contractual obligations.
