COVID 19 – Indian Government Gears Up to Boost Business, EODB and Attract FDI’s
General wpadmin June 27, 2020
The Government of India has been preparing strategies and action plans not only for business continuity and sectoral revival but also re-rolling the red carpet for global investors to continue to choose India as their preferred destination for investments.
This article covers the announcement of Indian government of a range of fiscal and monetary stimulus packages to facilitate compliances by the business houses as well as ease of doing business.
The Indian economy has been hit hard by the ongoing Coronavirus pandemic-driven global crisis. Although India has managed well till date in containing the spread of the virus, the COVID-19 pandemic has already disrupted normal economic activity and life in our country. India’s trade has been severely impacted. People have been facing a sudden loss in their incomes, causing a major drop in demand. The Government of India has been preparing various action plans and strategies for keeping alive the Indian economy. It is in action to re-roll the red carpet for global investors to continue to choose India as their preferred destination for investments. To rescue the economy, the Indian government has announced a range of fiscal and monetary stimulus packages to facilitate compliances by the business houses as well as ease of doing business.
Some Key Relief Measures By the Central Government to Boost Business are as follows:
A) Financial Measures:
The Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman has announced several important relief measures taken by the Government of India in view of COVID-19 outbreak, especially on statutory and regulatory compliance matters related to several sectors.
These measures focus on getting back to work i.e., enabling employees and employers, businesses, especially MSME’s, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector have also been unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector are also covered. Key measures include:
Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs.
Rs 20,000 crore Subordinate Debt for Stressed MSMEs.
Rs 50,000 crores equity infusion through MSME Fund of Funds.
Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.
The scheme under PMGKP in which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020.
Rs 45,000 crores Partial credit guarantees Scheme 2.0 for Liabilities of NBFCs/MFIs.
Rs 30,000 crores Special Liquidity Scheme for NBFC/HFC/MFIs.
The due date of all Income Tax Returns for AY 2020-21, extended to 30 November, 2020 & tax audit due date extended to 31st October 2020.
The time limit for furnishing of annual return in Form GSTR-9(Annual Return) and Form GSTR-9C (Reconciliation Statement), electronically through the common portal for F.Y. 2018-19 have been extended from 30th June, 2020 till 30th September, 2020.
The TDS rates for all non-salaried payment to residents, and TDS rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21.
B) Trade Measures:
Helpdesk operationalized by DGFT for COVID-19 related export or import issue.
24X7 custom clearance till end of 30 June 2020.
Foreign Trade Policy 2015-2020 extended for one year; other immediate relief measures also announced.
Department of Commerce has provided a number of relaxations / extensions of various compliance deadlines etc. to address corona pandemic related hardships of exporters.
C) Corporate Measures:
Decriminalization of Companies Act violations involving minor technical and procedural defaults such as shortcomings in CSR reporting, inadequacies in Board report, filing defaults, delay in holding of AGM.
Lower penalties for all defaults for Small Companies, One-person Companies, Producer Companies & Start Ups.
Requirement of sending physical copies of annual report to shareholders under the regulations covered under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, are dispensed with for listed entities who conduct their AGMs during the calendar year 2020 i.e. till December 31, 2020.
Requirement of proxy for attending and vote in general meetings in Regulation 44(4) of LODR is dispensed temporarily in case of meeting held through electronic mode only.
Relaxation from publication of advertisements in the newspapers: SEBI has exempted publication of advertisements in newspapers, as required in Regulation 47 and Regulation 52(8), for all events scheduled till 30th June, 2020 which was earlier exempted till 15th May, 2020.
Listed entities which are banking and/or insurance companies or having subsidiaries which are banking and/or insurance companies may submit consolidated financial results under regulation 33(3)(b) for the quarter ending June 30, 2020 on a voluntary basis. But they are required to submit their standalone financial results.
D) Extension of Validity of Environmental Clearances:
Extension of validity of prior issued environmental clearances for all projects and activities which are expiring between March 15, 2020 and April 30, 2020, till June 30, 2020 to ensure uninterrupted operations.
E) Reserve Bank of India- Improvement Measures:
RBI has increased maximum permissible period of pre-shipment and post shipment export credit sanctioned by banks from the existing one year to 15 months, for disbursements made up to July 31, 2020
It has extended the time period for completion of remittances against normal imports into India (except in cases where amounts are withheld towards guarantee of performance) from 6 months to 12 months from the date of shipment for such imports made on or before July 31, 2020.
NBFCs, which are required to comply with Indian Accounting Standards (IndAS), may follow the guidelines duly approved by their Boards and advisories of the Institute of Chartered Accountants of India (ICAI) in recognition of impairments.
Lending institutions are permitted to extend the moratorium on term loan instalments by another 3 months, i.e., from June 1, 2020 to August 31, 2020.
Other relief measures for consumers and businesses:
Relief to both consumer and lenders, including a three month moratorium on loan repayments and relaxation of norms related to default.
Relaxation to employers with regards to filing ESI Contribution for the period October 2019 to March 2020. They are allowed to file this contribution upto 11th June, 2020.
Sustainable Development Goal – Ease of Doing Business:
Indian government has promoted “competitive federalism” among the Indian states through its “Make in India” initiative, with the objective to improve the nation’s rank in the World Bank’s Ease of Doing Business (EoDB) ranking. With its “Make in India” campaign and the increase in Ease of Doing Business rankings, India has become a shining spot for investors across the globe.
From a global perspective, China cannot remain a trusted partner anymore. This creates huge opportunities for India. Several companies are likely to shift their bases from China post COVID, the pandemic being only a trigger for them to leave, though other reasons are rampant like wage inflation, real estate inflation, and the Chinese government trying to push companies deep into mainland China.
There has been a demand from international investors for labour and judicial reforms, specifically on the sanctity of contracts and resolution of disputes. Centre and some of the state governments are discussing some changes in these areas.
FDI limit in defense production through automatic route has been increased to 74% from 49%, while private sector participation has been allowed in space exploration as part of structural reforms that were announced for a variety of sectors including mineral mining, civil aviation and atomic energy.
The measures introduced by the Government of India to ensure that businesses keep moving so that we, as a nation can keep walking towards our collective goal of growth, in all the verticals are significant and can be seen as steps in the right direction to facilitate the businesses to run amidst lockdown and social distancing. Undoubtedly, more fiscal stimulus measures are the need of the hour to tackle crippling businesses but considering that the longevity of the pandemic is not known, one can hope that the Government may come up with additional fiscal stimulus measures, which could be broader in scale and having far–reaching effects.