Economic Stimulus Package Part 1 announced by the Finance Minister

Economic Package Covid-19 India

Today the Hon’ble Finance Minister (‘FM’) Mrs Nirmala Sitaraman announced the part 1 of the Economic Relief Package following the Public Address of the Prime Minister on 12th May 2020. The Prime Minister, announced a special economic package of around Rs 20 lakh crores, amounting to 10 percent of India’s GDP during his speech to Spur growth, and to build a self reliant India.

Keeping with the vision of the Prime Minister, FM made her announcement for businesses including MSMEs and emphasised that in the wake of COVID-19, there is a need for liquidity, Ease of doing business, and reducing the compliance burden and due diligence. In light of the same, she announced 16 measure comprising 6 announcement for MSME, 2 under Employee Provident Fund (‘EPF’), 2 measures for Non-Banking Finance Companies (‘NBFCs’), Housing Finance Companies (‘HFCs’) and Micro Finance Institutions (‘MFIs’), 1 For Power Distributor Companies, 1 for Contractors, and 1 for Real estate and 3 Tax measures.

Highlights of the Announcement is as under:


  1. Collateral free automatic loans will be granted to MSMEs. Emergency credit lines to Business/ MSMEs from Bank and NBFC upto 20% of outstanding credit will be provided. Borrowers having less than Rs 25 crore outstanding loan, or upto Rs 100 crore turnover, will be eligible. These loans will be 100% credit guaranteed, and shall have a tenor of 4 years, and moratorium of 12 months for repayment of principle. The scheme will be valid till 31st October 2020.
  2. Allocation of Rs 20,000 crores is made for Sub-ordinate Debt to MSMEs – who are NPA or stressed MSMEs. Government will provide Partial Credit Guarantee Support for this purpose to banks.
  3. Fund of fund with a corpus of Rs 10,000 crores for MSMEs in a mother & daughter fund model will be created to infuse equity into MSMEs who have potential and are viable, to help them expand their capacities and get listed in the markets they choose.
  4. Definition of MSME: The Finance Minister said that, low threshold in MSME definition have created fear among MSMEs of graduating out of the benefits and hence killing the urge to grow.
  5. Hence, the definition of MSME has been revised where two fold criteria being investment and turnover is brought about. The differentiation between manufacturing and Service sector is removed.

6. Global tenders in Government Procurement upto Rs 200 crores will be disallowed as a step to help MSMEs to increase their business and become a Self Reliant India.


  1. Under Pradhan Mantri Garib Kalyan Yojana (‘PMGKY’), establishments having less than 100 workers, where 90% of the employees are drawing less than Rs 15K salary, EPF Contribution of 12% each by employer and employee was made by Government for the months of March, April, May 2020. This is now extended for the next 3 Months – June, July and August 2020.
  2. For establishments not covered in PMGKY, the EPF contribution by employer and employee will be reduced to 10%, from existing 12% for the next 3 months. This exemption is not for Central and State PSUs.


  1. NBFCs struggling to raise debt in the market, will now benefit from Special liquidity scheme announced by the Finance Minister. Under the scheme, the Government will invest in “investment grade debt papers” listed in primary and secondary markets. Further the security will be guaranteed by the Government.
  2. NBFCS, HFCS and MFI servicing MSMEs who are facing liquidity issue can benefit from partial credit guarantee scheme which will cover the Primary Bond issued, commercial papers of such entities. First 20% loss will be borne by Government of India as a primary guarantor. AA rated commercial papers and below including unrated papers will be eligible under this scheme.

Power Distribution Companies

PFCs and RECS to infuse money against receivables to Distribution companies against state guarantees. These distribution companies are expected to pass these benefits final consumers.


  1. Contractors such as Railways, Road, transport, CPW Departments shall give extension upto 6 months for their contractors, for construction, providing goods or services etc
  2. Such extension shall be given for complying with the Contract Conditions, completion of works and other intermediary milestones. Concession period under PPE Contracts may also be extended by 6 months.
  3. Government Agencies may also partially release bank guarantees to the extent the work is completed to improve liquidity.

Extension in Registration and Project completion timelines of real estate projects under RERA:

The Ministry of Housing and Urban Affairs shall issue advisors to State and UT authorities,

  1. To treat COVID-19 as an event of “Force Majure” ie Act of God
  2. To grant Suo-motto extension to registration and completion dates by 6 months for all registered projects expiring on or after 25 March 2020 without individual applications.
  3. The Regulatory Authority may extend this timeline by another 3 months if needed.
  4. Issue fresh “project registration certificate” with revised timelines, and extend timelines for various compliances under RERA concurrently.


  1. With effect from 14 May 2020 till 31 March 2021, TDS on non-salaried payments made to residents in India and TCS rates for specified receipts shall be reduced by 25%. This shall apply to payments such as rent, contract, professional services, brokerage, commission dividend etc.
  2. All pending tax refunds to Charitable business, Trusts, non-corporate business & Professions including LLPs, Partnerships, Sole Proprietorship will be issued immediately
  3. The due date of all income-tax returns for FY 2019-20 will be extended from 31 July 2020 & 31 October, 2020 to 30th November 2020.
  4. Due date for submission of Tax audit reports will be extended from 30th September 2020 to 31 October 2020.
  5. The date of assessments getting barred as on 30 September 2020, will be extended to 31 December 2020. Those getting barred on 31st March 2021 will be extended to 30th September 2021.
  6. Vivad se vishwas scheme will be extended to 31 December 2020 without any additional payment.

Click here to read the Press Release.