India Announces Amendments and Packages, Massive New Financial Combined Stimulus of USD 266 Billion

Published on May 29, 2020

Ashok Maheshwary & Associates LLP Chartered Accountants has shared the following updates on the stimulus packages by the government of India.

The government of India has announced a number of amendments and packages including massive new financial combined stimulus of USD 266 billion. Announced in five tranches, the stimulus aims to build a self-reliant India and to combat the damage caused by the coronavirus pandemic in the country. The five tranches mentioned below focused on different sectors ensuring that the benefit reaches everyone affected by the pandemic:

Focused on healthcare, education and also on de-criminalization of the Companies Act, ease of doing business, and public sector undertakings.

You may also click here to view the Highlights of the Stimulus Package.

We have also highlighted below the points that are relevant for foreign investors:

Relief under Taxation

Due Date of all ITR filings shall be extended from 31st July, 2020 & 31st October, 2020 to 30th November, 2020 and for tax audit filing from 30th September, 2020 to 31st October, 2020.
Period of Vivaad Se Vishwas Scheme for making payments without additional amount extended to 31st December,2020.
Date of assessments getting barred as on 30th September, 2020 has been extended to 31st December, 2020 and for those getting barred as on 31st March, 2021 extended to 30th September, 2021.
All pending refunds to charitable trusts, non-corporate business & professions including proprietorship, LLPs and co-operatives shall be processed immediately.

Relief to MSMEs

New Definition of MSMEs

Investment limit revised upwards
Additional criteria of turnover brought in to define MSMEs
Manufacturing and service-bases MSMEs to now enjoy same benefits

Foreign Direct Investment

Foreign Direct Investment in India averaged $1412.87 Million from 1995 until 2020. Although, During COVID-19 pandemic, FDI in India increased by $2873Million in February of 2020.
In April 2020, Government of India notified changes in FDI rules which made prior approval of the Government mandatory for foreign investments from countries that share border with India, to prevent opportunistic takeover of domestic firms amid Covid-19 pandemic.
FDI limit in the defense manufacturing under automatic route will be raised from 49% to 74%.

Insolvency & Bankruptcy Code, 2016 (IBC) Measures

The default threshold limit of INR 100,000 has been steeply raised to INR 10 Million. This is to help small companies facing the threat of defaults due to coronavirus-related lockdown. The government has raised the threshold that would trigger insolvency proceedings to INR 10 Million from current INR 1,00,000. This raising of the threshold will help small and medium enterprises (MSME’s).
Special Insolvency Resolution framework for MSMEs under Section 240A of the Code to be notified soon.
Suspension of fresh initiation proceedings up to one year.
COVID-19 related debt to be excluded from the definition of default under the IBC.

Companies Act Measures

Commencement of Business: New Companies to be given 6 more months for filing Declaration of Commencement of Business with the Registrar of Companies.
Debentures: Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, maybe done so before 30th June 2020.
Deposit Reserve: Deposit Reserve that was earlier required to be created by 30.04.2020 can now be created by 30.06.2020.
Residency requirement for a Director: The minimum residency requirement for a director of 182 days in India is waived off for the current Financial Year.

Decriminalization of Companies Act defaults:

Violations involving minor technical and procedural defaults such as shortcomings in CSR reporting, inadequacy in board report, filing defaults and delay in holding AGMs will be decriminalized from Company Act. From now on, the company shall face only monetary penalty on companies.
Majority of the compoundable offences sections to be shifted to internal adjudication mechanism (IAM) and powers of RD for compounding enhanced (58 sections to be dealt with under IAM as compared to 18 earlier.
Seven compoundable offences under Companies Act being dropped, 5 offences to be dealt under an alternative framework

Employee Provident Fund Support

INR 25 Billion EPF Support for Business & Workers for 3 more months

Under Pradhan Mantri Garib Kalyan Package ( payment of 12% of employer and 12% employee contributions were made into EPF accounts of eligible establishments)
This was provided earlier for salary months of March, April and May 2020
This support will be extended for 3 months i.e. salary months of June, July and August 2020
This relief would provide liquidity of INR 25 Billion to 367000 establishments and for 7.2 Million employees
Extension of ESIC coverage to employees working in establishments with less than 10 employees on voluntary basis
Mandatory ESIC coverage through notification by the Central Government for employees in hazardous industries with less than 10 employees;

EPF contribution reduced for Business & Workers for 3 months INR 67.5 Billion·

To support business, it is necessary to provide more take-home salary to employees and also to give relief to employers in payment of Provident Fund dues.
Therefore, the statutory PF contribution of both employer and employee will be reduced to 10% each from the existing 12% each for all establishments covered by EPFO for the next 3 months.
CPSEs and State PSUs will, however, continue to contribute 12% as an employer contribution
This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension
This will provide relief to about 650000 establishments covered under EPFO and about 430 Million such employees

Listing norms

Companies can now list securities directly in foreign jurisdictions. Private Companies that list NCDs on stock exchanges are not to be regarded as listed companies.

Feel free to contact Ashok Maheshwary & Associates LLPs should you need any more information.

Ashok Maheshwary & Associates LLP

Chartered Accountants

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E: amit@akmglobal.com

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