We will have to wait for other announcements which will be made in the coming days as stated by the Finance Minister to understand whether this economic package actually translates from one being on paper to lead the economy out of this depression.
In continuation to the announcement of Rs 20-lakh crore package made by the Prime Minister in his address to the nation on 12.05.2020, the Finance Minister, in her press conference on 13.05.2020, announced the following reliefs:
Big Boost to the MSME sector in sync with the Atmanirbhar Bharat announcement. The package provides more liquidity to MSMEs, raises the bar for investment and turnover and removes the distinction between the manufacturing sector and the service sector. This is further strengthened by the boost given to NBFCs/housing finance companies and microfinance institutions wherein they have been permitted to buy debt payable documents under full guarantee from the Government of India.
As a result, it will not only provide liquidity but generate jobs and enable the journey towards realisation of atmanirbhar bharat motto. Further, with doing away from the global tender route, these MSMEs will also be able to work on contracts upto Rs 200 crore which earlier was not within their domain due to technicalities.
Inclusion of COVID in the definition of ‘Force Majeure’ or Act of God, and empowering the State/UT regulatory authority to suo moto revise the date of registration and completion of projects by 6 months, is a boost for the already stressed real estate sector. This will not only provide more time to complete the project without any liability for delay in completion of the project but will also prevent them from facing the legal cases on account of delay limited to this 6 months’ extension window.
Reduction in rates of TDS/TCS by 25% from 14.05.2020 to 31.03.2021 is a positive step which aims to provide more liquidity in the hands of receivers. However, the moot question remains that whether the business will be as usual for such contractors/ professionals / agents etc.? In case the revival across sectors is not seen as being planned/projected, the relief by way of this reduction will be minuscule and not as is being projected. However, the move will definitely increase liquidity.
In continuation to the slew of reliefs provided by the Finance Ministry in terms of compliances with tax laws, extension of time to file returns (both for individuals and corporates) till 30/11/2020 and extension of time for tax audit from 30/09/2020 to 31/10/2020, will not only provide a respite to tax payers but will also be beneficial for the professionals who have to meet the deadlines. A positive move to enable the tax payers to comply with tax laws and participate in nation-building exercise.
Further, extension of Vivad Se Vishwas Scheme till 31.12.2020 will enable the government realize substantial revenue while at same time, assessee’s can buy peace of their mind from all their income tax related disputes.
The economic package is a diverse bag which has something or the other for every sector of economy. Though, it was expected that first and foremost focus of such package would be on the agriculture sector as that’s the main sector for our country, however, no announcement was made for the said sector and may be in the coming days, we will have an announcement for this sector also.
While the intent of the government is to revive the economy with help of boosters like these packages, one must not forget that revival of economy is a tedious task. One has to wait for finer details to understand that whether these packages will actually boost the economy or these figures remain on paper.
There is an old saying ‘Rome was not built in a day’. Similarly, we will have to wait for other announcements which will be made in the coming days as stated by the Finance Minister to understand whether this economic package actually translates from one being on paper to lead the economy out of this depression. While no announcement was made for the agricultural sector, healthcare sector or migrant workers, the government needs to focus and pay attention to these primary sectors if in case we are really looking at boosting the economy.
(By Sumit Batra, a Tax Expert/Tax Advocate)