Highlights of Special GOI Package of Rs 20 lakh crores for Atmanirbhar Bharat (COVID-19)

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The package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world.

Key Highlights of the Special economic and comprehensive package of Rs 20 lakh crores Announced by the Govt. of India, for relief and credit support related to businesses, especially MSMEs to support Indian Economy, Atmanirbhar Bharat and to fight against COVID-19.

GOI Presentation on Rs. 20 Lac Crore Special Package: AtmaNirbhar Bharat (COVID-19)

Hon’ble Prime Minister Shri Narendra Modi yesterday announced a Special economic and comprehensive package of Rs 20 lakh crores, equivalent to 10% of India’s GDP. He gave a clarion call for आत्मनिर्भर भारत अभियान or Self-Reliant India Movement. He also outlined five pillars of Aatmanirbhar Bharat– Economy, Infrastructure, System, Vibrant Demography and Demand.

During the press conference here today, Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman said in her opening remarks that Prime Minister Shri Narendra Modi had laid out a comprehensive vision in his address to the Nation yesterday. She further said that after spending considerable time, the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of economic package in fight against COVID-19.

“Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, Smt. Sitharaman said our focus would be on land, labour, liquidity and law.

The Finance Minister further said that the Government under the leadership of Prime Minister Shri Narendra Modi has been listening and is a responsive Government, hence it is fitting to recall some reforms which have been undertaken since 2014.

“Soon after Budget 2020 came COVID-19 and within hours of the announcement of Lockdown 1.0, Pradhan Mantri Garib Kalyan Yojna (PMGKY) was announced,” Smt. Sitharaman said. She further said that we are going to build on this package.

“Beginning today, for the next few days, I shall be coming here with the entire team of the Ministry of Finance to detail the Prime Minister’s vision for Aatma Nirbhar Bharat laid out by the Prime Minister yesterday,” Smt Sitharaman said.

Smt. Nirmala  Sitharaman today announced measures focused on Getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector were also covered.

Over the last five years, the Government has actively taken various measures for the industry and MSME. For the Real Estate sector, the Real Estate (Regulation and Development) Act [RERA] was enacted in 2016 to bring in more transparency into the industry. A special fund for affordable and middle income housing was set up last year to help with the stress in this segment. To help MSMEs with the issue of delayed payment by any Government department or PSUs, Samadhaan Portal was launched in 2017. A Fund of Funds for startups was set up under SIDBI to boost entrepreneurship in the country and various other credit guarantee schemes to help flow of credit to the MSMEs.

Key Highlights of the Special economic and comprehensive package of Rs 20 lakh crores Announced by Govt. of India (COVID-19)

a) Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs

To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with upto 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 Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.

b) Rs 20,000 crore Subordinate Debt for Stressed MSMEs

Provision made for Rs. 20,000 cr subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.

c) Rs 50,000 crores equity infusion through MSME Fund of Funds

Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.

d) New definition of MSME

Definition of MSME will be revised by raising the Investment limit. An additional criteria of turnover also being introduced. The distinction between manufacturing and service sector will also be eliminated.

e) Other Measures for MSME

e-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days.

f) No Global tenders for Government tenders of up to Rs 200 crores

General Financial Rules (GFR) of the Government will be amended to disallow global tender enquiries in procurement of Goods and Services of value of less than Rs 200 crores.

g) Employees Provident Fund Support for business and organised workers

The scheme introduced as part of PMGKP under which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020. Total benefits accrued is about Rs 2500 crores to 72.22 lakh employees.

h) EPF Contribution to be reduced for Employers and Employees for 3 months

Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months. This will provide liquidity of about Rs.2250 Crore per month.

i) Rs 30,000 crores Special Liquidity Scheme for NBFC/HFC/MFIs

Government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity being provided by RBI. Investment will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs. This will be 100 percent guaranteed by the Government of India.

j) Rs 45,000 crores Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs

Existing Partial Credit Guarantee scheme is being revamped and now will be extended to cover the borrowings of lower rated NBFCs, HFCs and other Micro Finance Institutions (MFIs). Government of India will provide 20 percent first loss sovereign guarantee to Public Sector Banks.

k) Rs 90,000 crore Liquidity Injection for DISCOMs

Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal instalments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.

l) Relief to Contractors

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, including in respect of EPC and concession agreements.

m) Relief to Real Estate Projects

State Governments are being advised to invoke the Force Majeure clause under RERA. The registration and completion date for all registered projects will be extended up to 6 months and may be further extended by another 3 months based on the State’s situation. Various statutory compliances under RERA will also be extended concurrently.

n) Tax Relief to Business

The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately.

o) Tax related measures

Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” – The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21.This will provided liquidity to the tune of Rs 50,000 Crore.

The due date of all Income Tax Returns for Assessment Year 2020-21 will be extended to 30 November, 2020.  Similarly, tax audit due date will be extended to 31 October 2020.

The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020.

Notification for reduction in rate of TDS & TCS

TDS / TCS Rates for non-salaried payments reduced by 25% till March 31, 2021

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The reduced TDS and TCS rate will be for specific payments such as payment for a contract, professional fees, interest, rent etc.

In order to provide more funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts has been be reduced by 25% of the existing rates.

The Finance Minister Nirmala Sitharaman said that, Payment for the contract, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of Tax Deduction at Source.

This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow 14th May 2020 to 31st March, 2021.

The Finance Minister also said that, It will help to Rs 50,000 crores liquidity through TDS/TCS rate reduction.

She also said that the income tax department has already cleared Rs 18,000 crore worth of refunds where the quantum due was up to Rs 5 lakh and instructed that all pending refunds to charitable trusts and non-corporate business and professions will be issued immediately.

TDS rate was not deducted on salaries, after considering various eligible deductions such as 80C of the salaried person. This had been done to ensure that the salaried individual did not bear the burden of paying higher taxes at the year end.

CBDT Defers Requirement of Registration of Charitable, Religious Trusts by 4 Months Till October 1

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Earlier, such registrations/approvals were granted without any specific expiry period unless specifically withdrawn by concerned tax authority. Under the new law introduced by Finance Act 2020 and effective from June 1, 2020, all such registrations/ approvals would now be issued with an expiry period of 5 years.

In  a relief to religious trusts, educational institutions and other  charitable institutions, the income tax department on Friday deferred by  4 months till October 1 the requirement of registration of these  entities.

In  a relief to religious trusts, educational institutions and other  charitable institutions, the income tax department on Friday deferred by  4 months till October 1 the requirement of registration of these  entities.

“In  view of the unprecedented humanitarian and economic crisis, the CBDT  has decided that the implementation of new procedure for approval/  registration/notification of certain entities shall be deferred to 1st  October, 2020,” an official statement said.

Finance Act 2020 prescribed substantial changes in law pertaining to registration/approval of trusts and charitable institutions, whose income are exempt under section 10(23C), Section 11 or for the purpose of Section 80-G of the Act for tax deductible donations.

Earlier, such registrations/approvals were granted without any specific expiry period unless specifically withdrawn by concerned tax authority.

Under the new law introduced by Finance Act 2020 and effective from June 1, 2020, all such registrations/ approvals would now be issued with an expiry period of 5 years.

Further, all trusts/charitable institutions already having approval or registration were also supposed to file applications for renewal of there registration/approval within 3 months of new law coming into force, i.e. August 31, 2020.

Nangia Andersen Consulting Shailesh Kumar said “in light of COVID-19 outbreak and consequent lockdown, giving relief to the taxpayers, this timeline has been deferred by 4 months. Thus, new law which was supposed to come in effect from 01 June 2020 would now come in effect from 01st October 2020.

“All existing trusts/ charitable institutions would now need to file applications for renewal of their registrations/ approvals by December 31, 2020 instead of earlier August 31, 2020,” he added.

The statement said various representations were received to the finance ministry expressing concerns over the implementation of new procedure from June 1, 2020 due to outbreak of coronavirus (COVID-19) and consequent lockdown and there have been a number of requests to defer the applicability of new procedure.

“This is a welcome move and provides expected relief in light of genuine hardships created by COVID-19. The entities benefited by this circular would be religious trusts, hospitals, educational institutions or other public charitable institutions created for welfare of public and allows exemption from income tax on account of their activities and charitable purpose,” Kumar added.

Consulting firm AKM Global Tax Partner Amit Maheshwari said, “This is a welcome clarification as in the absence of this extension, it was extremely difficult to comply with these procedures. Several representations had been made on this matter and this is indeed a welcome move.”

Govt suspends IBC provisions that trigger fresh insolvency proceedings

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As per existing norms, if a payment default exceeds 90 days then the lender concerned has to refer the account for resolution under IBC or any other mechanism permitted by the Reserve Bank of India (RBI). The lender does not have the option to restructure the loan.

The government has decided to suspend insolvency and bankruptcy proceedings for at least six months owing to challenges businesses are facing due to the Covid-19 pandemic.

A new Section is likely to be added to the Insolvency and Bankruptcy Code (IBC).

It will suspend Sections 7, 9, and 10, which are used to trigger insolvency proceedings for six months or a period not exceeding one year from the date they commence, the official said.

A new Section is likely to be added to the Insolvency and Bankruptcy Code (IBC).

It will suspend Sections 7, 9, and 10, which are used to trigger insolvency proceedings for six months or a period not exceeding one year from the date they commence, the official said.

Section 7 of the Code enables financial creditors to start insolvency proceedings against a company while Section 9 gives operational creditors these powers.

Under Section 10, the promoter of the company can trigger insolvency proceedings against his or her own concern.

All the three Sections will cease to be effective for six months or further.

The provision is likely to require a change in the Act, according to experts.

“This is a positive step for companies.

But for companies, which were otherwise already in stress and could have found resolution under the IBC, their resolution may also be delayed due to this suspension,” said Anshul Jain, partner, PwC India.

Jain also said it needed to be seen if this move would have a positive impact on privately negotiated transactions on mergers and acquisitions.

In March, Union Finance Minister Nirmala Sitharaman had indicated the government would consider suspending the IBC for a few months if the Covid situation persisted and caused stress to businesses.

Already, the default threshold for stressed companies facing insolvency has been increased from Rs 1 lakh to Rs 1 crore.

In March, Union Finance Minister Nirmala Sitharaman had indicated the government would consider suspending the IBC for a few months if the Covid situation persisted and caused stress to businesses. Already, the default threshold for stressed companies facing insolvency has been increased from Rs 1 lakh to Rs 1 crore.

Read the Original Notification:

IBBI Notification dated 20th April, 2020

Govt approval must for all FDIs from neighboring countries including China, in same lines as made by several countries

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ASSOCHAM Secretary said that by amending the FDI rules through the Press Note No 3 , the Department for Promotion of Industry and Internal Trade, has not only brought the FDI proposals for greenfield investments but also infusion into the existing projects, under the ‘government route’

The government has amended the Foreign Direct Investment (FDI) policy to discourage opportunistic investment in Indian companies by neighbouring countries in the midst of the Coronavirus pandemic.

This comes after China’s central bank recently raised stake in Housing Development Finance Corporation (HDFC) to a little over 1 percent.

As per the new amendment, FDI investments into Indian companies from the neighbouring countries will now require a nod from the government. This will be applicable to all countries that share a land border with India – such as China among others.

The amendment specifies that transfer of ownership of Indian companies arising out of FDI investments from neighbouring countries will now also be subject to government approval.

Similar FDI restrictions were earlier placed on Pakistan and Bangladesh.

These changes were notified via a Press Note by the Department for Promotion of Industry and Internal Trade (DPIIT).

As per the note, “Government has reviewed the FDI policy for curbing opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic.”

The note states: “A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”

“Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment,” it said.

“In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the mentioned sectors, such subsequent change in beneficial ownership will also require Government approval,” it added.

The decision will take effect from the date of Foreign Exchange Management Act (FEMA) notification.

Earlier, reports said that market regulator Securities and Exchange Board of India (SEBI) was monitoring equity transactions in India by Chinese companies and banks. Such transactions have come under the scanner at a time when the share prices of companies have dropped due to the economic impact of the coronavirus pandemic.

Globally, transactions by Chinese firms and institutions have come under scrutiny recently since the assets are being purchased at low valuations. Nations such as the US, Japan and Australia have already placed restrictions on Chinese companies buying assets.

Source:Amendment of FDI Policy

All pending income tax refunds up to Rs 5 lakh to be released immediately, amid rise in coronavirus cases.

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The Ministry of Finance said that, IT Department to release all pending income tax refunds up to Rs 5 lakhs immediately. Around 14 lakh taxpayers to benefit.

In the context of the COVID-19 situation and with a view to providing immediate relief to the business entities and individuals, it has been decided to issue all the pending income-tax refunds up to Rs. 5 lakh, immediately.

This would benefit around 14 lakh taxpayers.

It has also been decided to issue all pending GST and Custom refunds which would provide benefit to around 1 lakh business entities, including MSME.

Thus, the total refund granted will be approximately Rs. 18,000 crore.

Read Press Release