Economic package : Part 1 - Important announcements relevant to the IT sector | nasscom | The Official Community of Indian IT Industry

Terms of use

Terms of Use

The use of this site and the content contained therein is governed by the Terms of Use. When you use this site you acknowledge that you have read the Terms of Use and that you accept and will be bound by the terms hereof and such terms as may be modified from time to time.

All text, graphics, audio, design and other works on the site are the copyrighted works of nasscom unless otherwise indicated. All rights reserved.
Content on the site is for personal use only and may be downloaded provided the material is kept intact and there is no violation of the copyrights, trademarks, and other proprietary rights. Any alteration of the material or use of the material contained in the site for any other purpose is a violation of the copyright of nasscom and / or its affiliates or associates or of its third-party information providers. This material cannot be copied, reproduced, republished, uploaded, posted, transmitted or distributed in any way for non-personal use without obtaining the prior permission from nasscom.
The nasscom Members login is for the reference of only registered nasscom Member Companies.
nasscom reserves the right to modify the terms of use of any service without any liability. nasscom reserves the right to take all measures necessary to prevent access to any service or termination of service if the terms of use are not complied with or are contravened or there is any violation of copyright, trademark or other proprietary right.
From time to time nasscom may supplement these terms of use with additional terms pertaining to specific content (additional terms). Such additional terms are hereby incorporated by reference into these Terms of Use.

Disclaimer

The Company information provided on the nasscom web site is as per data collected by companies. nasscom is not liable on the authenticity of such data.
nasscom has exercised due diligence in checking the correctness and authenticity of the information contained in the site, but nasscom or any of its affiliates or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this site. The information from or through this site is provided "as is" and all warranties express or implied of any kind, regarding any matter pertaining to any service or channel, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement are disclaimed. nasscom and its affiliates and associates shall not be liable, at any time, for any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information contained on the site. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness, suitability or applicability of the information to a particular situation.
nasscom or its affiliates or associates or its employees do not provide any judgments or warranty in respect of the authenticity or correctness of the content of other services or sites to which links are provided. A link to another service or site is not an endorsement of any products or services on such site or the site.
The content provided is for information purposes alone and does not substitute for specific advice whether investment, legal, taxation or otherwise. nasscom disclaims all liability for damages caused by use of content on the site.
All responsibility and liability for any damages caused by downloading of any data is disclaimed.
nasscom reserves the right to modify, suspend / cancel, or discontinue any or all sections, or service at any time without notice.

For any grievances under the Information Technology Act 2000, please get in touch with Grievance Officer, Mr. Anirban Mandal at data-query@nasscom.in.

New

See all

No notification found.

Economic package : Part 1 - Important announcements relevant to the IT sector

Jayakumar Selvaraj

@Jayakumar

May 14, 2020

Public Policy

935

On 13^th May, the Finance Minister made the first set of announcements, on the economic package. The measures focused on providing much needed liquidity infusion, esp for the MSME sector. Given the cash flow constraints faced by MSMEs, it’s a very welcome move and should help the tech startups and smaller IT-ITES SMEs. We look forward to this being executed quickly. In the next set of announcements, we hope to see steps towards boosting demand and consumption. Also, for the IT-ITeS sector, we urgently need the extension of tax benefits available for SEZ to enable our companies stay competitive.

Important announcements relevant to the IT sector with comments below.

MSMEs

Change in definition of MSMEs : New definition will be based on investment in plant/machinery and No distinction in definition for manufacturing and service enterprises. The new definition is below.
- Micro – Investment below 1 crore & turnover upto 5 crores
- Small – Investment below 10 crores & turnover upto 50 crores
- Medium – Investment below 20 crores & turnover upto 100 crores

Comments: Massive change in coverage of definition. Given that smaller companies are the most vulnerable, this is an important step to design specific measures to support them.

Update : A second revision of the turnover limit was announced on 1^st June. The new definition is below.

Micro enterprise: investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
Small enterprise: investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
Medium enterprise: investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

Collateral-free loan for enterprises with less than 100 crores turnover and 25 crores outstanding loan.
- Loan amount – Upto 20% of entire outstanding credit as on 29.2.2020.
- Term of loan – 4 yrs.
- Moratorium on principal – 12 months.
- Govt to provide 100% credit guarantee cover to Banks & NBFCs on principal & interest.

Comments: Provides for credit extension with minimal additional procedures. This will be a faster way to generate cash for immediate essential needs.

Fund of funds :
- Corpus of Rs. 10000 crores to infuse 50000 crores into MSMEs with viable business.
- Will be operated through Mother funds and daughter funds.

Comments: This is in line with NASSCOM’s suggestion made to the FM. This will enhance capital availability for MSMEs.

Within 45 days, Central Govt and CPSU to honour all receivables of MSMEs.

Comments : This is in line with NASSCOM’s suggestion made to the FM. Will ease cash flow constraints of MSMEs.

Govt procurement: Global tenders will be disallowed for procurement tenders upto Rs 200 crores.

Comments : Move to benefit Indian companies.

Subordinate debt to functioning MSMEs which are classified as NPAs / Stressed.
- Govt to provide Rs. 4000 cr to Credit Guarantee fund trust for Micro and Small Enterprises (CGFTMSE )
- CGTMSE to provide partial guarantee to Banks.
- 20000 crore loan to be facilitated through this.
- Promoters will receive the loan and infuse as equity.

EPF

PF scheme announced earlier under the Pradhan Mantri Garib Kalyan Yojna (PMGKY) extended by three months ( June – August 2020 ).

Comments : Only organisations with less than 100 employees, with atleast 90% employees earning less than Rs.15000, are eligible to avail this benefit.

Reduction in statutory PF contribution rate from 12 % to 10 % for both employers and employees for next three months. This relaxation not available for members covered under PMGKY.

Comments : Would free up a part of the wage cost for companies, and would help in easing cash flow constraints. Employees take home salary will increase.

Taxation

Reduced rates of TDS, for non-salaried specified payments made to residents, and rates of Tax Collection at Source for specified receipts, by 25% of the existing rates. The reduced rate of TDS will apply on payment made for contract, professional fees, interest, rent, dividend, commission and brokerage income. This will be applicable for payments made between May 14, 2020 till March 31, 2021.

Comments : Earlier this year, as part of the budget, the TDS for technical services was brought down 10% to 2%. TDS would further come to 1.5% now. This would reduce cash outflow and free up funds to be redirected for other needs.

Period of Vivad se Vishwas Scheme for making payment without additional amount extended to 31^st December, 2020.

Comments : Will benefit those individuals/institutions planning to settle tax disputes. No additional penalty or interest to be levied if this option be used.

Tax audit deadline has been extended from 30^th September to 31^st Date of assessments getting barred on 30^th September, 2020 extended to 31^st December, 2020 and those getting barred on 31st March, 2021 will be extended to 30th September, 2021.

Comments : Additional time, would be useful, given the lockdown.

Others

Extension of up to 6 months to be provided by all Central Agencies (like Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc) for works including service contracts.

Comments : Companies facing project delays due to disruption of work in the last two months, will be benefitted.

Expectation of IT-ITeS industry which were not covered.

Fiscal support of Rs.2600 crores to small IT-ITES companies, to cover 50% of the employees’ salary for a period of 3-months, so that companies do not have to undertake layoffs and employees can be redeployed once normalcy returns.
Extension of tax benefits available to SEZ, for another 5 years.
Utilisation of MAT credits in the new income taxation regime, which allow income tax at 22%.

Economic package MSMEs

Disclaimer

That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.

Jayakumar Selvaraj

Jayakumar