- Set up COVID-19 MSME corpus of Rs 1 lakh crore
- Extend soft loans with 50% government guarantee for affected sectors
- Provide wage subsidy to employers including input tax credit
- Provide option to defer tax payments by six months
- Extend permission for delayed GST payments, without levy of interest, late fees or penalties, to all statutory payments
- Tax relief for domestic travel and tourism from May 1, 2020 to October 31, 2020
On its part, the Reserve Bank of India (RBI) did try to ease the liquidity crisis among MSMEs through a string of measures on April 17, but suggestions coming from Congress go much beyond solving the liquidity crisis.
The five-point suggestions, prepared after wide-ranging stakeholder consultations, include setting up of a corpus fund of Rs 1 lakh crore, ensuring liquidity for business continuity, measures to prevent mass job losses, facilitation of deferment of payment and a pause on litigations, and measures to improve consumer sentiment and investment climate in the country.
The first suggestion, setting up of a COVID-19 MSME corpus fund of Rs 1 lakh crore, is to enable the government roll out immediate distress relief measures to the MSME sector. A 24x7 MSME control room and helpline to provide cross-country logistics support addressing supply chain continuity has also been demanded.
On ensuring liquidity for business continuity, Congress wants the Central government to direct all its agencies and public sector units to pay their bills immediately. It wants financial institutions to reschedule/restructure loans, as well as offer six-month payment moratoriums to MSMEs (RBI has partially addressed this issue). A demand to extend soft loans with 50 per cent government guarantee for affected sectors through SIDBI, along with an ad-hoc enhanced working capital limit of 25 per cent on request, was another suggestion. The party also wants enterprises which have no finance facilities from public sector banks to be offered ad-hoc working capital loans, up to a maximum of Rs 30 lakh or an amount equal to four-month average turnover of last financial years, whichever is lower, through the Ministry of MSME's collateral coverage scheme.
To avoid job losses, the party wants the government to provide wage subsidy to employers including input tax credit for salary paid beyond 15 days to employees who cannot work from home. "Give tax credit to companies for giving paid sick leave. Four weeks of paid sick leave for MSME employees should be advocated. Self-employed including hawkers, small shopkeepers, those offering private services such as plumbers, electricians, drivers etc., who do not fall into the regular or casual salaried workers in other enterprises, must be provided direct cash transfers," the Congress proposal says.
In order to enable MSMEs to defer their statutory payments, Congress has suggested the extension of the closure date of financial year 2019-20 for all forms of MSME enterprises from partnerships, proprietorships, LLP, private limited to limited firms. An option to defer tax payments by six months, permission for delayed GST payments, without levy of interest, late fees or penalties, has been sought. Congress also wants the government to issue an advisory to waive all taxes to local bodies, fixed charges on electrical installations and property taxes for at least next three months. "No punitive action should be taken by NCLT for delays of repayments etc. till December 31, 2020," the opposition party says.
Post-lockdown measures to improve consumer sentiment and investment appetite also talk of exemption of service tax (from April 1, 2020 to August 31, 2020), tax relief for domestic travel and tourism (from May 1, 2020 to October 31st, 2020), additional tax breaks and depreciation benefits for new investments in Q2/Q3 of 2020 and tax exemptions/ depreciation benefits to industries that are particularly badly hit for the second, third and fourth quarter of 2020-21.
The health of MSMEs remains crucial as the sector contributes close to half of the country's total exports and almost one third of India's GDP. Ever since the outbreak of COVID-19 and the closing of international borders followed by the near-complete domestic lockdown, MSMEs have been facing a sharp demand depression and a massive cash crunch.
The first financial package announced by the finance minister Nirmala Sitharaman covered bigger enterprises, but not micro-businesses that employ five to 10 workers. The Congress package aims at this large informal sector.
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