COVID-19 Relief announcement for businesses that may benefit Software product MSMEs

May 18, 2020 - By Sudhir Singh

Finance Minister, Nirmala Sitharaman announced stimulus to help economic revival in wake of COVID-19. Out of these measure a major portion was announced for businesses in MSMEs category.

Some of the important measures announced and that may directly benefit MSMEs in Software product eco-system are as given below.

  1. Collateral free loan of Rs 3 lakh crores for MSMEs.  This is expected to enable 45+ lakh MSME units to restart work and save jobs. How and who will disburse this is yet to be announced.
  2. This is an announcement which can be used in best ways by many MSMEs. However, the ease of getting this loan will only be known once the complete process and guideline is issued.
  3. Subordinate debt provision of Rs 20,000 crore for 2 lakh stressed MSMEs.
  4. Rs 50,000 crore equity infusion via Mother fund-Daughter fund for MSMEs that are viable but need handholding. A fund of funds with corpus of Rs 10,000 crore will be set up that will help MSMEs to expand capacity and help them list on markets.
  5. Global tenders will be disallowed up to Rs 200 crore for government
  6. Statutory EPF contribution to be reduced to 10% from 12% for all organisations and their employees covered by EPFO. Government expects this to infuse Rs 6,750 crore of liquidity. This measure is temporary and will provide relief to only those who has substantial workforce in lower bracket of Salaries.
  7. TDS rates have been slashed till March 2021 i.e. for entire financial year almost by 25%. An important rate of TDS applicable here is section 194J which is reduced from 10% to 7.5%. This will just increase the liquidity available in hand of Software product companies. A full list is given in link here at Income Tax site.
  8. The Definition of MSMEs has been revised. This was long due and will help more units to take benefit.  In present definition the distinction between manufacturing & services sector MSME has been removed. The new definition will be based on below norm.
    • Micro units with investment till Rs 1 crore, turnover up to Rs 5 crore
    • Small units with investment till Rs 10 crore, turnover up to Rs 50 crore
    • Medium units with investment till Rs 20 crore, turnover up to Rs 100 crore

iSPIRT was pursuing with Govt. of India to provide incentives for MSMEs to buy from Indian Software product companies.

However, in present situation of high volatility and huge pressure from MSMEs which is a sector that is more important for revival, this has not been considered. iSPIRT will keep pursuing with MeitY and MSME ministry for creating a domestic market access.

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