Businesses all around the Globe have been taking a hit due to the pandemic and subsequent lockdowns in most countries. India, because of its strong economy and swift actions has somehow been able to control its impact till date but now it is facing some challenges as its supply chain has been disrupted, imports are getting down, and markets are bearish. In fact, according to a recent survey, about 26% of businesses surveyed said their sales and purchases have been impacted due to the outbreak which resulted in the lockdown. Startups and MSMEs are grappling with problems like low liquidity or cash flow and slowing down of demand.

The Government understanding the problem has immediately announced host of measures with the idea of reducing the hardship faced by the Entrepreneurs and boosting the overall Economy. Some of the key takeaways of the announcement are mentioned below-

 

 

 

Relaxation as per Income Tax

• Last date for returns extended to 30-June-2020
• Delayed payments, interest rate reduced from 12 to 9%
• Vivaad se Vishwaas Scheme has been extended to 30-Jun-20; Additional charge of 10% that would have been levied, is being removed till 30-June-20
• Due Dates for Issue of Notice, Approval order, Filing of appeal, Furnishing of Returns, Return Statement, Applications, Reports, any other document or compliance, including where the time limit was expiring on 20-Mar-20 shall all be extended
• Issue all pending IT Return upto 5 lakhs thus benefiting around 14 Lakh Taxpayer

 

Relaxation as per GST and Customs

• Last date for March, April and May returns extended to 30-June 2020
• For companies <INR 5cr turnover: no interest/late fee to be charged for delayed filing
• Last date for opting composition scheme has been extended to June 30, 2020
• Sabka Vishwas scheme for settling disputes that was extended to 31-March, is further extended to 30-June-2020
• Customs clearance would operate 24×7
• Issue all pending GST and Custom Refunds which would benefit around 1 Lakh Businesses

 

Relaxation as per Corporate Laws

• MCA Registry: moratorium issued from 1st April to 30th September 2020
• No additional fees for late filing
• Board Meetings: Relaxing by a period of 60 days till the next two quarters
• Applicability of the Companies Auditor’s Report Order 2020 will be made applicable from FY 2020-2021 instead of 2019-2020
• If independent directors have not been able to hold even one meeting, the same shall not be a violation
• For Newly incorporated companies: requirement to file COB within 6 months of incorporation; additional time of 6 months extended for them
• Company director who does not comply with minimum residency requirement of 182 days u/s 149, would not be treated as a violation
• Threshold for Bankruptcy amount moved from INR 1 lakh to INR 1 crore
• Funds spent on measures to tackle these outbreak will be counted towards the corporate social responsibility (CSR) activity of companies and will be compliant with the CSR Norms

 

Relaxation as per Labour Laws 

• The Government will pay the entire provident fund contribution of those who earn less than Rs 15,000 per month in companies having less than 100 workers. That amounts to 24% of basic pay 12% from the employee and 12% from the employer. This will be paid by the government for three months.

• The Employees’ Provident Fund Regulations will be amended to include the pandemic as grounds for allowing a non-refundable advance of 75% of the corpus or three months of wages, whichever is lower, from their accounts.

• The Employee State Insurance Corporation has relaxed the ESI Contribution Deadline by 30 days. This means ESI Contributions for the month of February and March 2020 can be filed and paid up to April 15,2020 and May 15,2020 instead of March 15,2020 and April 15,2020 respectively.

 

Also understanding that there is a sort of liquidity crisis in the market that Government has encouraged various stakeholders to come together and take cognizance of the situation. Post this several initiatives has been taken to tackle the situation which can be broadly classified into-

 1-Actions taken by Small Industries Development Bank of India (SIDBI)
2-Actions taken the Reserve Bank of India (RBI)

Action taken by Small Industries Development Bank of India (SIDBI)

SIDBI has launched a set of schemes and program to help companies operating in India. The SAFE Schemes are exclusively targeted to fight the healthcare issues whereas CSAS is sector agnostic.

	SAFE	SAFE Plus
Objective	To finance MSMEs who are manufacturing any products or providing any services related to fighting this issue such as permitted drugs, sanitisers, masks, body suits, overalls, gloves, shoe covers, ventilators, testing labs, etc. The list is indicative.	To provide emergency working capital to MSMEs which are producing goods and services directly related to fighting this issue, against specific orders form the government / government agencies.
Max Loan Amount	·         INR 50 Lakhs	·         INR 100 Lakh (linked to turnover)
Repayment	·         Term loan: Upto 5 years ·         WCTL: Upto 18 months	·         4 months of each drawal ·         Revolving facility
Interest Rate	5% p.a. on reducing balance basis
Security	No collateral
Turnaround Time	Within 48 hours
Items covered	Permitted rugs, Ventilators, N95 Masks, Eye protection (visor / goggles), Protective Gowns / Aprons, Medical masks (surgical / procedure), Shoe covers, IV Fluid – DNS, IV Fluid – Dextrose, IV Sets, IV Cannula, ICU Beds, Cardiac monitors, Syringe pumps, Portable x-ray machines, Endotracheal tube, Suction tube, Oxygen cylinders, Rubber Sheets, testing labs, etc. The list is indicative.

 

The CSAS Loan on the other hand is sector agnostic and needs to be re paid in 24 installments with an interest of 10.5% pa. The Covid-19 startup assistance scheme (CSAS) will provide quick working capital loans up to Rs 2 crore to startups whose cash flow and liquidity have been adversely impacted by the pandemic provided it matches the following eligibility Norms –

 1- Government defined Start-ups which has received funding through at least one of the Alternate Investment Funds registered with SEBI.

2- Startups with a minimum employee base of 50 employees.

3- Startups having FY 2019 and FY 2020 minimum turnover between INR 10 crore to INR 60 crore

4- Startups should have positive unit economics.

5- Startup should have been incorporated for less than 10 years

6- Startups should have a positive Net Worth

7- Startups should have demonstrated innovative measures for ensuring business continuity during the Covid – 19 period.

8- Startups should have taken adequate measures and ensured employee safety and their financial stability

9- Promoter / Founder of startup should have invested his own capital in the business

The below category is not eligible

• Written off Startups by AIFs
• Startups who are in Stress usually other than the present Covid-19 (as recommended by the Fund Manager)
• Startups having working capital facilities with any Bank

Mandatory Security:

• First Pari-Passu charge on current assets of the Company
• Keyman Insurance to the extent of facility amount disbursed to secure the facility

Additional Security, if available:

• Hypothecation of movables of the company.
• Pledge of Intellectual Property
• Pledge of Promoter shares

 

Actions taken by the Reserve Bank of India (RBI)

• In a bid to ease the lack of liquidity that borrowers might face amid the nationwide lockdown to contain the spread of the pandemic, the Reserve Bank of India (RBI) has allowed banks and financial institutions to offer a three-month moratorium on term loans and credit card bills. During this period, borrowers can opt to not pay their equated monthly installments (EMIs) or credit card dues and only the interest will levied over here. The Government also assured that missing of these dues during this period, will not affect the Credit Score of the defaulting party.

• The RBI has also reduced the Repo Rate by 0.75 basis points. This has a direct impact on the Bank. The Commercial Banks will now be able to forward Business Loans to its clients at a much cheaper rate which will have a positive result in the fund availability of the business.

 

All in all, the Government is continuously working with various stakeholders so as to bring further policies which would not only improve the financial condition of the Business Community and people associated with it but also trying to minimize the overall impact of this phenomenon on the overall economy of the country.

 

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