All you need to know about Rs. 20 Trillion Package

What is the Government's Rs.20 Trillion relief fund?

As Covid-19 induced havoc in people’s lives, another disaster occurred due to the lockdown enforced to stop the virus. As the country started phased re-opening after more than a month-long lockdown, the government announced some special stimulus packages to boost the economy and get it back on track. On 13th May 2020, one such announcement made by Finance Minister Nirmala Sitharaman, announced a Rs. 20 trillion package guaranteed to help small scale industries get up and running. What does it have in store for you? Let’s find out.

Size of the Package

A Rs. 20 Trillion Economic Revival Package is significantly large, equivalent in value terms to 10% of the Indian GDP. There haven’t been such big packages announced in the country earlier. All over the world, there were several lockdowns, and the economy was suffering. The packages offered by developed countries were vastly greater than the ones by developing countries, which couldn’t afford such direct infusion of money into the system. India, being a developing country, offered among the largest stimulus packages by focusing on boosting the economy, starting with the smaller scale industries.

What are Small Scale Industries?

Where every investment is at a small or micro level, and the manufacturing, production, service rendering, etc., all are at a smaller scale as compared to other medium and large-scale industries. Small scale industries have a component of one-time investment that doesn’t exceed Rs. 1 crore.

Small Scale Industries(SSI) are an important part of our economy, having a direct impact on the economy, and more importantly on the lives of people by providing jobs, products, and services, across the country. Small scale industries are labour-intensive due to lower investments, and smaller scales. This helps in contributing majorly towards employment.

Bakeries, photography studios, beauty parlours, small toys, paper bags, craft stores, etc., all -form our small-scale industry. The decision to provide a stimulus to small-scale industries was taken based on its important role in helping bring the industry out of the COVID-19-induced rut.

MSMEs

Micro, small, and medium enterprises(MSME), form the larger part of similar industries. Small scale industries are often talked about in the same breath as MSMEs, because the term is used more actively, and the government has put efforts into recognizing this sector, so that development work can be carried out. Cottage industries are also considered an unofficial part of it because they fall in the same scale bracket.

1. Loans for MSMEs

The loan schemes announced under the Atma Nirbhar Bharat Yojana (Self-Reliant India Scheme) aimed at getting 4.5 million units back on their feet. The 20 trillion fiscal stimulus packages announced several loans, all meant to lead the industries towards recovery.

2. ₹3 Trillion Collateral Free Loan Package

The ₹3 Trillion Collateral Free Loans will be credit guaranteed, covering banks and NBFCs too. The collateral free loans would come with a 12-month automatic loan moratorium, so that the industries can get back on their feet. These loans were available till 31st October and were made use of by several of the small-scale industries. The pillars of economy, infrastructure, technology-driven systems, demography, and demand were important constituents, and needed refueling, which was carried out by the Finance Minister in her stimulus package.

3. Funds for Stressed MSMEs - Rs. 20,000 Crore Boost

An additional fund of Rs. 20,000 crores was announced for stressed MSMEs. This was a shot in the arm for the MSMEs that were already stressed due to an impending slowdown, and which further had to bear the brunt of Covid19. Many of the MSMEs suffered due to slow down at the global level because they catered via outsourcing. The slowdown in demand made it difficult for them to survive. Covid19 had put the brakes entirely, thus turning them into stressed entities. The lockdown forced the government to investigate into the details, and to help the industry recover as additional measures were announced.

4. Fund of Funds - Rs. 50,000 Crore Additional Boost

A Rs. 50,000 Crore funds of funds was also allocated as equity to MSMEs to boost the sector further. It is important to note that every package announced came with several backups and backups of backups. The Covid19 situation was especially new and unanticipated. Therefore, the measures went towards covering the backups also. This fund of funds was announced for those situations wherein there might be an additional need of funds.

5. MSME Redefined

The announcement was made that MSME would be redefined by removing the difference between the manufacturing and service sector. There was also an increase in the investment limit for a company to be classified under MSME, thereby increasing the scope of MSMEs and investment. The criteria of turnover are also introduced. All steps have been taken to define MSMEs in a better manner, and thus facilitate the benefits that are to be transferred.

6. 45 Days Release for Receivables

To ensure there’s no blockage of funds, the receivables from the government and CPSEs for MSMEs will be carried out within 45 days. Furthermore, it was decided that MSMEs would be promoted via e-market, replacing the doubtful trade fair and exhibitions in the current scenario.

7. Funding NBFCs and MFIs

Non Banking Finance Companies(NBFCs) and Micro Finance institutions(MFIs) serve the purpose of last mile connectivity in terms of small loans and short-term loans. Where the banks and large lending institutions fail, and serve only the elite, it is the NBFCs and MFIs whose reach makes a difference to countless MSMEs. A Rs. 45000 crore package that includes partial credit guarantee for NBFCs and MFIs, was provided to reach out to them, thus increasing the reach of the MSMEs for investment and loans.

Conclusion

MSMEs form the lifeline of our economy. They are spread out evenly, cater to the local population, and provide employment. The need to revive MSMEs from the current scenario wasn’t only about the present Covid19 situation and the lockdown induced problems, but also of the impending situation ahead of all of us. This situation could only be overcome with government stimulus packages. The economy had been rendered still.

The 20 Trillion Package included measures, directly and indirectly affecting MSMEs, thus helping sustain the growth that was going to be adversely affected by Covid19. MSMEs were direct benefactors of several schemes, while other schemes involved getting them the revenue via increasing the spending factor of the consumers. Without consumers, no business can thrive, and that was also taken care of by the package.

Also read:

1) What are Some Beneficial Government Policies for Small Home-Based Businesses in India?
2) How small business promotes industrialisation?
3) Best Small Business Ideas For Women
4) Why are Small Businesses Important to the Community?

FAQs

Q. Is there any tax relief for individuals and organisations in the package?

Ans. There is considerable tax relief. In some cases, the rate has been reduced, while for others, more time has been provided. Apart from that, pending income tax refunds were announced to be released immediately for charitable trusts and non-corporate businesses and professions. This includes professorships, partnerships, and LLPs and co-operatives.

For non-salaried individuals, TDS/TCS rates were reduced by 25% for up to March 31, 2021.

Q. Any extensions have been provided for due dates for various filings?

Ans. All income tax return dates were extended up to 30th November 2020, which were recently again extended up to 31st December 2020. Tax audit dates were extended up to 31st October 2020. Other extensions are provided under Vivaad se Vishwas, Real Estate Projects under Rera, and contractors of PSUs.

Q. What is the Emergency Working Capital Facility?

Ans. It is the name given to the Rs. 3 lakh crores available to MSMEs as part of term loan. A concessional interest rate, one-year moratorium, and many other features are added. The Emergency Working Capital Facility was an extension of the provisions provided in the Financial Year 2020-21 Annual Finance Budget, with more scope considering the pandemic.