Internet, mobile body suggests govt way to help MSMEs retain employees amid Covid-19

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Updated: Apr 21, 2020 6:08 PM

Credit and Finance for MSMEs: The association, which has Amit Agarwal -- Amazon India head as its Chairman, urged the government to allow e-commerce businesses to resume full services.

The small businesses are facing acute liquidity crunch amid lockdown.

Credit and Finance for MSMEs: Internet and Mobile Association of India (IAMAI), which represents businesses in the internet and mobile industries, has suggested the government to postpone statutory payments such as Tax Deducted at Source (TDS), Employees’ Provident Fund (EPF), and Employee State Insurance (ESI), amid Covid-19 outbreak, for six months for SMEs in the services sector. This will help small businesses “continue to retain employees while giving maximum cash salaries to them,” said IAMAI. MSMEs in trade and other services employed around 7.5 crore people as per FY19 annual survey by the MSME Ministry.

Majority small businesses are facing acute liquidity crunch amid lockdown and have exhausted their savings in salaries and Covid-19 related expenses such as masks, sanitizers etc. at factories and workplaces. Consequently, while they somehow managed to pay March salaries to employees but for April and following they might have to make salary cuts even as many of them may have to reduce their workforce. “Considering the current health crisis and lockdown, many of these companies may have to resort to salary cuts, which will have a larger impact on the employees,” a statement by IAMAI said.

“Instead of putting a time period to the relief under the lockdown, the government should provide relief for six months post lockdown is lifted completely as nobody knows how much time the current situation would take to settle down. Post lockdown is lifted, there would be labour issues for at least one-two months, banks would ask for payments, there would be pending bills like electricity, telephone and other statutory payments. So the relief is required post lockdown for MSMEs businesses to come back to the normal level of business operations,” Mukesh Mohan Gupta, President, Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) told Financial Express Online. The association has around 1.10 lakh MSME members.

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However, postponing TDS deductions from employees’ salaries and contributions by both employee and employer towards ESIC and EPF will help the workforce to use the entire salary at least in the current period. The Finance Minister Nirmala Sitharaman had reduced the interest rate to 9 per cent from 18 per cent earlier on delayed deposit of TDS while tax returns deadline was extended to 30 June 2020. The minister had also announced last month that the government will bear the 24 per cent contribution of both employee and employer combined to the EPF for the coming three months to help MSMEs with better cash flows and liquidity.

The association, which has Amit Agarwal — Amazon India head as its Chairman, also urged the government to allow e-commerce businesses to resume services following the Home Secretary notification on Sunday clarifying that e-commerce companies would be allowed to sell only essential goods. This had surprised companies such as Amazon, Flipkart, Snapdeal others who were planning to restart their full services following the government’s order last week that noted e-commerce companies will be allowed but didn’t specifically have mentioned that non-essentials would also be allowed.

In a tweet recently, Commerce minister Piyush Goyal had called the clarification important for maintaining level the playing field between online and offline retailers. “The debate of online Vs offline is an incorrect portrayal of the ground reality. There are lakhs of sellers from the physical markets across India who also sell online. In fact, it is these medium & small offline enterprises that are powering the online e-commerce in a significant way,” IAMAI had said.

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