While most businesses across the world and across the country are dealing with lock-down, the governments are taking all the necessary steps they can to ease the conditions for survival of small businesses. Recently in the month of May, our Hon’ble Finance Minister, Ms. Nirmala Sitaraman made some important announcements that would impact micro, small and medium scale businesses across the country. These measures are simplified and summarized here, so that you can make the best use of such schemes during these testing times.
1) Balanced classification of MSMEs
The classification of Micro, Small and Medium enterprises has been harmonized. This helps in simpler categorization of your organization by various financing institutions and lets them appropriately offer you a relevant and meaningful product :
- Micro enterprises are ones with total business investment of less than Rs. 1 crore and annual Turnover of < Rs. 5 crores
- Small enterprises are ones with total business investment of less than Rs. 10 crore and annual Turnover of < Rs. 50 crores
- Medium enterprises are ones with total business investment of less than Rs. 20 crore and annual Turnover of < Rs. 100 crores
2) Collateral-free loans for MSMEs
The government has made provision for providing Collateral Free loans to MSMEs. Loans of up to Rs. 3 lakh crores in total will be given out under this scheme. These loans will be for 4-year term, with no principal payment required for the first year. If you have annual turnover of less than Rs. 100 crores, and not more than Rs. 25 crores in outstanding borrowings, you can take fresh loan under this scheme. This scheme is open till October 31, 2020. We urge you to contact your financing institution to know more details about such loans and your eligibility.
3) Financial aid for MSMEs classified as NPA
For MSMEs which are under stress and their accounts are NPA with various financing institutions, the government will provide support. Rs, 20,000 crores have been provided under this scheme and your financing institution will be able to provide you more details on eligibility and relief that can be taken.
4) Focus on domestic firms for Government contracts
You can now participate in government tenders to procure materials from domestic suppliers. For contracts with total value of less than Rs. 200 crores, the government will solely focus on procurement from domestic suppliers.
5) Restructured Provident Fund norms for employees
If you are required to deduct Provident Fund for your employees while paying them salaries, the government has provided certain benefits:
1. Reduced rate of PF deduction at 10% for next three months. This has been reduced from 12%.
2. If your employees are covered under the Pradhan Mantri Garib Kalyan Package – the EPF payments will be made by the government for another three months, i.e. June to August
It is advisable to take benefit under most of these schemes and aim towards a quick revival of your business. Stay healthy & stay safe!