Announcing India's stimulus package to fight the COVID crisis, Union Finance Minister on Wednesday pushed the due date of all income-tax return for FY 2019-20 from 31st July 2020 & 31st October 2020 to 30th November 2020 and tax audit from 30th September 2020 to 31st October 2020. In a series of announcements Nirmala Sitharaman also informed that the central government has decided to change the definition of MSMEs (Micro, Small and Medium Enterprises). Announcing this in her press conference, Nirmala Sitharaman said this change is in "favor of the MSMEs".
The definition is being changed because of the low threshold limit in the old MSME definition created a "fear" among MSMEs that if they expand further, they may lose the benefits that MSMEs enjoy. She said this has been "killing the urge to grow" among the MSMEs, adding that this has been a long-pending demand from the sector.
Definition of MSMEs, raises investment limits:
The Centre has decided to review the definition of micro, small and medium enterprises (MSME) and announced an increase in investment limits. As per the new changes, businesses with investment of less than Rs 1 crore and turnover of Rs 5 crore would be classified as micro-enterprises. Under the existing criteria, a company with an investment of less than Rs 25 lakh in the manufacturing sector and less than Rs 10 lakh in the services sector were considered micro-enterprises.
The investment limit of small enterprises has been increased to Rs 10 crore, and the companies would have to have a turnover of less than Rs 50 crore.
Further, the investment limit for medium enterprises has been increased to Rs 20 crore and the turnover limit has been kept at Rs 100 crore.
Sitharaman said that the necessary amendments to laws will be brought about to give effect to the changes.
Among other measures for MSMEs, she also announced a collateral-free automatic loan for businesses including MSMEs up to Rs 3 lakh crore.
Under the measure, borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover would be eligible for the special collateral-free loan.
Rs 30,000 cr special liquidity scheme for NBFCs, HFCs and MFIs:
Finance Minister Nirmala Sitharaman on Wednesday announced a Rs 30,000 crore special liquidity scheme for non-banking finance companies (NBFCs), housing finance companies (HFCs) and micro-finance institutions (MFIs). Under the scheme, investments will be made in both primary and secondary market transactions in the investment-grade debt paper of these institutions.
As per the government, the scheme would provide liquidity support to mutual funds along with NBFCs, HFCs, and MFIs and create confidence in the market.
Further, the government has also announced Rs 45,000 crore partial credit guarantee scheme for NBFCs.
Under the scheme, first 20 per cent loss will be borne by Cenre, and even unrated papers will be eligible for investment, enabling NBFCs to reach out even to MSMEs in far-flung areas.
The step has been taken as NBFCs, HFCs and MFIs with low credit rating require liquidity to do fresh lending to MSMEs and individuals.