The coronavirus (Covid-19) pandemic is all set to wreck havoc on the micro, small and medium enterprises (MSMEs). At least 22% of the over 75 million MSME units in the country are likely to shut if the lockdown in cities extends beyond four weeks and around 43% may face the same situation if panic extends beyond eight weeks, according to an industry expert.
Citing ground impact information gathered from various sources, KE Raghunathan, past president of the All India Manufacturer’s Organisation (AIMO) said that to mitigate sufferings of the small businesses, the government should increase the limit of GST compliance eligibility of firms to Rs 1 crore a year turnover from the current Rs 20-40 lakh, both for SMEs and services sector.
The government should also provide working capital to an extent of 90% of unsold, fully paid-up stock on ad-hoc basis by banks immediately. A one- time settlement of outstanding NPA accounts from MSME is the need of the hour. RBI must allow NBFCs/banks to lend even to companies with negative balance sheets as long as the loans are fully secured. Currently, the law does not permit this.
“MSME’s have gone through their most difficult times in the last 3 years in India. It is a known fact that they faced one setback after another, first being demonetisation, followed by glitchy GST implementation, economic slowdown of real estate and auto sectors to which most of the MSMEs were main source of suppliers, followed by financial and banking crisis and now the coronavirus, which seems to be the final blow to the MSMEs,” said Raghunathan.
According to him, the concept of work from home is irrelevant for MSMEs and the companies in the sector have started facing huge financial burden of unpaid salaries, monthly instalments, among others. On their part, MSMEs also need to be blamed for not coping up with modernisation, economisation, digitisation and globalisation.
Covid-19 is leading to various issues in the industry including shrinkage of exports, cessation of production, non-availability of manpower, uncertainty of consumption, among others and the government needs to take supportive measures, including extension in due date of various tax payments, moratorium on certain sections of the Insolvency and Bankruptcy Code (IBC).
The Madras Chamber of Commerce and Industry (MCCI) recommends that the government look at the remedial measures that could provide timely relief to businesses and proactively ensure business continuity.
In a statement, Ramkumar Ramamoorthy, president, MCCI and managing director of Cognizant India, urged the government to defer the due date of advance Income Tax. Since courts and tribunals are likely to function only partially, the tax department should not enforce demands arising out of orders where appeals are being filed along with stay petitions.
The due date for payment of GST for March 2020 has to be deferred and the government should refrain from recovery proceedings such as attaching bank accounts or garnishee proceedings for recovery of interest, given that these would further choke business and industry.
In terms of defaults during these months, there should be a moratorium for the next few months on filing for insolvency and bankruptcy proceedings. Classification of NPAs as per current RBI guidelines should be deferred for a few months. The government also needs to make arrangements to facilitate ‘Work from Home’ and relax labour law provisions considering the emergency.
Necessary relaxations of timeframe should be provided under the Companies Act since there are timelines in the context of holding General Meetings and Board Meetings apart from filing requirements under Companies Act and Sebi regulations, he added.
The government should play a supportive role and build confidence in the minds of the industry and ensure that the economy is not crippled due to the pandemic, said R Ganapathi, president of the Southern India Chamber of Commerce and Industry (SICCI).
Apart from extension of income tax payment due date, the chamber also sought extension of timeline for applying under the normal period for ‘Vivad Se Vishwas Scheme’ and all income tax incentives expiring on March 31, 2020 be extended for one more year. There should be 200% weighted exemption of expenses to corporates on all domestic conferences and the proposed ‘Tax Collected at Source’ on travel in Finance Bill 2020 should not be notified. GST and customs duty should be exempted for hand sanitisers, soaps and medical drugs required to fight against the disease. SICCI has also sought that the timeline for audits for listed companies be extended, apart from extension in timeline for board meetings.