benefits to startups / msmes amidst covid-19 · sector and startups to grapple with the devastating...
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BENEFITS TO STARTUPS / MSMES AMIDST COVID-19
Contents
Introduction
What are MSMEs?
What are Startups?
Benefits on MSME / Startups
Registration
Registration Process
Measures Taken by Various
Departments During COVID-19 Situation
Proposals Announced During
AtmaNirbhar Bharat Abhiyan Presentation
Crisis Management During COVID-19 –
Turning Challenges into Opportunities
Any Assistance?
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© 2020 // 2
“Atmanirbhar Bharat Abhiyan” or “Aatmanirbhar Bharat Scheme”
In his third address to the nation on 12 May 2020, amid the pandemic, Prime Minister Narendra Modi announced an INR 20-
lakh crore economic relief package - “Atmanirbhar Bharat Abhiyan” or “Aatmanirbhar Bharat Scheme”.
The relief package was unveiled in 5 tranches from 13 May 2020 by Finance Minister Mrs. Nirmala Sitharaman.
Several measures have been announced by the Finance Minister that would help the Micro Small Medium Enterprises (MSMEs)
sector and Startups to grapple with the devastating impact of this global pandemic.
Role of MSMEs in Indian Economy :
MSMEs are backbone of the Indian economy and has helped economy grow.
MSME Sector contributes significantly to the Indian Economy in terms of Gross Domestic Product, Exports and Employment
generation.
MSME Sector contribute 29.7% to National GDP and 49.66% of Indian Exports comprises of MSMEs.
Even Startups would be eligible to avail benefits of various incentives and schemes already existing in place and relief measures
recently announced for the MSME Sector under the Aatmanirbhar Bharat Scheme if they are eligible to register as MSMEs.
MSMEs
Startups
Introduction
// 3© 2020
VALUE PROPOSITION
Introduction toMGB
What are MSMEs? Micro, Small and Medium Enterprises Development Act, 2006
(“MSME Act”) notified on 18 July 2006 and came into force from 2
October 2006.
Classes of MSMEs
Composite Criteria : Investment and Annual Turnover (to come into effect from 01.07.2020)
Classification Micro Small Medium
Manufacturing
& Services
Investment < INR 1 crore
and
Turnover < INR 5 crore
Investment < INR 10 crore
and
Turnover < INR 50 crore
Investment< INR 50 crore
and
Turnover < INR 250 crore
• Any enterprise except for a trading entity can become a MSME.
• Ministry of Micro, Small and Medium Enterprises vide notification dated 01 June 2020 notified the following criteria for
classification of Micro, Small and Medium enterprises :
Manufacturing Enterprises
The Manufacturing Enterprises are
defined in terms of investment in
Plant & Machinery
Service Enterprises
The enterprises engaged in providing
or rendering of services and are
defined in terms of investment in
equipment
// 4
What are MSMEs?
© 2020
VALUE PROPOSITION
Introduction toMGB
What are Startups? • Startups are basically Companies having
a product that is unique and that are in
early stages of development.
• Under the Startup India Action Plan,
Startups that meet the criteria under
G.S.R. notification 127 (E) are eligible to
apply for recognition.
Eligibility Criteria for Startup Recognition :
• The Startup should be incorporated as a private
limited company or registered as a partnership
firm or a limited liability partnership.
• Turnover should be less than INR 100 Crores in
any of the previous financial years.
• An entity shall be considered as a Startup up to
10 years from the date of its incorporation.
• The Startup should be working towards
innovation/ improvement of existing products,
services and processes and should have the
potential to generate employment / create
wealth.
• An entity formed by splitting up or reconstruction
of an existing business shall not be considered
a "Startup“.
// 5
What are Startups?
© 2020
Public Procurement
Policy for Micro &
Small Enterprises
(MSEs) Order, 2012
Concession on
Patent & Trademark
registrations
Bar code
registration subsidy
IT / ITES units
registered as MSMEs
Collateral free loans
Focused approach
by BanksProtection against
delay in payment
NSIC ICRA
Performance & Credit
Rating Scheme
// 6
Benefits on MSME/Startup Registration
Relief under The
Insolvency and
Bankruptcy Code, 2016
© 2020
Concession on Patent and
Trademark registrations
A 50% fee concession is provided for
MSMEs vis-à-vis large entities on Patent
and Trademark filing fees.
Startups are provided a rebate of 80% on
patent fees as compared to the fee paid by
legal entity.
Protection against delay in payment
Buyers to pay Invoice on or before 45 days or
pay compounded interest to MSMEs.
Specialised portal created for facilitating
MSMEs to report cases of the delayed
payment of bills.
Collateral Free Loans
Credit Guarantee Fund Scheme (“CGF
Scheme”) makes collateral-free credit
available to the MSEs.
Both the existing and the new enterprises are
eligible to be covered under the said scheme.
The Trust set up would make good the loss
incurred by the lender up to 85 per cent of the
outstanding amount in case of default.
MGB Profile
// 7
Benefits on MSME/Startup Registration
Bar code registration subsidy
The scheme makes it highly affordable for
MSE units to adopt GS1 global standards
in barcoding.
The Ministry of MSME reimburses 75% of
the one-time registration fees and 75% of
the annual renewal fees incurred for the
first three years.
© 2020
NSIC ICRA Performance & Credit
Rating Scheme
This scheme seeks to establish
independent, trusted third party opinion
on capabilities and credit - worthiness of
MSEs, and makes credit available at
attractive interest rates and ensure better
productivity.
Under this scheme (as per the turnover of
the MSEs) a percent of Rating Agency
charges are reimbursed by Ministry of
MSME.
// 8
Benefits on MSME/Startup Registration
Many banks / financial institutions charge
lower rates of interest to the Enterprises
which are registered as MSMEs.
Focused approach by Banks
towards MSME
Public Procurement Policy for
Micro & Small Enterprises (MSEs)
Order, 2012
Minimum 25 per cent of products produced
and services rendered by MSEs to be part
of procurement plan of Central Ministry /
Departments / PSUs.
3 per cent from within the target shall be
earmarked for procurement from MSEs
owned by women
4 per cent for procurement from MSEs
owned by SC / ST entrepreneurs.
Issue of tender sets are free of cost and
payment of Earnest Money is exempted.
© 2020
MGB Profile
Various other schemes announced by
Ministry of MSME to:
Facilitate / promote adequate flow of credit
from financial institutions/banks.
Support for technology up-gradation &
modernization.
Modern testing facilities and quality
certification.
Entrepreneurship development and skill
upgradation through appropriate training
facilities.
Support for product development, design
intervention, and packaging.
Assistance for better access to domestic
and export markets etc.
// 9
Benefits on MSME/Startup Registration
Relief under The Insolvency and
Bankruptcy Code, 2016 (“Code”)
Promoters of MSMEs exempted from
ineligibility criteria to bid, as long as they
are not wilful defaulters.
The rationale is that a business of an
MSME attracts interest primarily from its
promoters.
IT / ITES units registered as MSMEs
Various incentives are given by State
governments to the IT / ITES units which are
registered as MSMEs.
Registration / Stamp duty concessions.
Incentive on Power Tariff and Electricity Duty,
Capital Subsidy, GST incentive etc.
© 2020
MSMEs
• Existing or new Enterprises can file Udyog Aadhaar Memorandum (“UAM”) online athttp://udyogaadhaar.gov.in .
• Where online filing is not possible, offline application may be submitted to the concernedDistrict Industry Center.
• Enterprises which have filed Entrepreneurship Memorandum-I or EntrepreneurshipMemorandum-II or both, or the holders of Small Scale Industry registration may also file theUAM.
Startups
• Enterprises less than 10 year old can make Startup application online athttps://www.startupindia.gov.in/
• An entity formed by splitting up or reconstruction of an existing business shall not beconsidered a "Startup“.
• An entity incorporated as a Private Limited Company, Registered Partnership Firm or aLimited Liability Partnership can only register themselves under the startup India scheme.
// 10
Registration Process
© 2020
GOODS & SERVICES TAX (GST)
MGB Profile
Audit under provisions of GST Ministry of Corporate Affairs
(“MCA”)
“Companies Fresh Start Scheme" and "LLP
Settlement Scheme, 2020” announced to allow
defaulting Companies / LLPs to make a fresh start.
General Meetings through video conferencing
allowed and Time gap for conducting board
meetings relaxed to 180 days from present 120
days – for the first two quarters of FY 2020-2021
CARO 2020 will now be applicable from F.Y. 2020-
21 and filing of Form INC 20A (Commencement of
Business) relaxed by additional period of 6
months.
// 11
Measures Taken By Various Departments
During COVID-19
Reserve Bank of India (“RBI”)
Moratorium of total 6 months i.e. till 31 August
2020 on payment of instalments and loans.
A one-time restructuring of existing loans to
MSMEs without a downgrade in the asset
classification.
INR 15,000 crore to SIDBI to enable it to provide
liquidity support to MSME sector and meet
sectoral credit needs.
© 2020
GOODS & SERVICES TAX (GST)
MGB Profile
Audit under provisions of GST
Ministry of Labour and
Employment
GOI will pay EPF contribution of both employer
and employee for the months from March to
August for those establishments that have upto
100 employees and 90 percent of whom earn
under INR 15,000 monthly wage.
For establishments not covered above, the
Statutory EPF contribution of both employer and
employee has been reduced to 10% for the
months of May, June and July 2020.
// 12
Measures Taken By Various Departments
During COVID-19
Ministry of Finance - Goods &
Services Tax (“GST”)
Due date for Annual Return and GST Audit for F.Y.
2018-19 extended to 30/09/2020.
Extension in FORM GSTR-3B, due in March-April-May
2020 till last week of June 2020.
Penalties and interests waived/reduced for late filing of
GST returns.
Custom Clearance till 30 June 2020 will operate 24*7 as
an essential service.
Sab Ka Vishwas (Indirect Tax Scheme) – Due date
extended to 30 June 2020 without interest.
Companies can also now file return in FORM GSTR 3B,
for the period 21 April 2020 to 30 June 2020, through
EVC (electronic Verification Code). Only Proprietorship
and Partnership Firms had this option earlier.
Entities having NIL return in FORM GSTR 3B, now can
file through SMS using registered mobile number and
verified based on one time password.
© 2020
Guaranteed Emergency Credit Line (GECL)
Scheme
Under the Scheme, 100% guarantee coverage to be
provided by National Credit Guarantee Trustee Company
Limited for additional funding of up to Rs. Three lakh crore
to eligible MSMEs and interested MUDRA. borrowers, in
the form of a Guaranteed Emergency Credit Line (GECL)
facility.
Equity infusion for MSMEs through Fund of
Funds
Equity infusion of Rs. 50,000 crore for MSMEs through
Fund of Funds. This will establish a framework to help
MSMEs in capacity augmentation. This will also provide an
opportunity to get listed in stock exchanges.
Subordinate Debt for Stressed MSMEs
// 13
Proposals Announced During AtmaNirbhar
Bharat Abhiyan presentation
Provision of Rs 20,000 crore as subordinate debt to
provide equity support to the stressed MSMEs. This will
benefit 2 lakh stressed MSMEs.
Tax Collection at Source for the specified
receipts & Tax Deduction at Source (non-
salaried specified payments) rate reduction for
F.Y. 2020-21 by 25%.
All pending refunds to Charitable Trusts and
Non-Corporate Business and Professions
including Proprietorship, Partnership, LLP and
Co-operatives shall be issued immediately.
Due date for Income Tax Returns for F.Y. 2019-
20 will be extended from 31 July 2020 & 31
October 2020 to 30 November 2020 and for
Tax Audit from 30 September 2020 to 31
October 2020.
Date of Assessments getting barred on 30
September 2020 extended to 31 December
2020.
Period of Vivad se Vishwas scheme for making
payment without additional amount extended to
31 December 2020.
Tax Measures
© 2020
// 14
Proposals Announced During AtmaNirbhar
Bharat Abhiyan presentation
Minimum threshold to initiate
Insolvency proceedings has
been raised to INR 1 crore
from INR 1 lakh which largely
insulates MSMEs.
Suspension of fresh initiation of
Insolvency proceedings up to
one year, depending upon the
pandemic situation.
Empowering Central
government to exclude COVID
19 related debt from the
definition of default.
Special insolvency resolution
framework for MSMEs under
Section 240A of the Insolvency
and Bankruptcy Code, 2016 to
be notified soon.
Ease of Doing Business
e-market linkage for MSMEs
to be promoted to act as a
replacement for trade fairs
and exhibitions.
Fintech will be used to
enhance transaction based
lending using the data
generated by the e-
marketplace.
MSME receivables from
Government and Central
Public Sector Undertakings to
be released in 45 days.
Global tenders will be
disallowed in Government
procurement tenders upto
INR 200 crores.
Other important
announcements
Decriminalization of
Companies Act defaults
Majority of Compoundable
offence sections will be shifted
to Internal Adjustment
Mechanism.
Decriminalization of
Companies Act violations
involving minor technical and
procedural defaults such as
shortcomings in CSR
Reporting, Inadequacies in
Board Report, filing defaults,
delay in holding AGM etc.
Lower penalties for all defaults
for Small Companies, One-
person Companies, Producer
Companies & Startups.
© 2020
1. Tracking expenses against the Revenue Status :
2. Understanding amendments in various laws :
4. Liquidity challenges :
3. Restructuring of businesses :
It is important for businesses to conduct a proper assessment of their fixed
and variable expenses vis a vis revenues, this will help the entrepreneurs
in planning ahead in the current disconcerted market
The Corporates need to identify and keep track of the changes in existing
laws which will impact their businesses and accordingly change strategies,
induct experts and accordingly formulate suitable action plan.
Handling these challenging times may require the organizations to adopt
proactive realignment / restructuring measures. Businesses that wish to
take advantage of these opportunities can consider restructuring through
expansions, joint ventures, and divesting struggling and non-core assets.
The Companies might have to face the liquidity challenges forcing them to
identify alternate financing modes. Various fund raising strategies will have
to be formulated taking into consideration the laws applicable to the
Company and its implication.
// 15
Crisis Management During COVID-19 -
Turning Challenges into Opportunities:
© 2020
5. Contractual Obligations:
Businesses will have to consider what obligations can and cannot be met
during the national lockdown, and whether contracts can continue afoot once
COVID-19 restrictions are lifted. Relevant contracts needs to be checked to
see whether force majeure provisions will apply to COVID-19 and ensure that
any notice and timing requirements are complied with and consider mitigation
steps.
7. Reducing costs through Outsourcing :
Handling these challenging times may require the organizations to adopt
proactive realignment / restructuring measures. Businesses that wish to take
advantage of these opportunities can consider restructuring through
expansions, joint ventures, and divesting struggling and non-core assets.
6. Going digital to reduce concentration risk :
Its become imperative to digitally transform our places of work to be able to
operate effectively. Those companies who are able to use technology well to
keep going and rethink their business model for the future by fast-tracking
digital transformation will be ones ahead of their competition.
// 16
Crisis Management During COVID-19 -
Turning Challenges into Opportunities:
© 2020
Any Assistance?
// 1 7
Muffaddal is a qualified Company Secretary and LL.B with around 10 years
experience in the field of Legal and Compliance area.
He currently leads Legal, Compliance and Business Support vertical at
MGB Business Advisors Private Limited. He focuses on domestic and
cross border business set up, advising startups and Corporates on
regulatory framework and other varied corporate law matters.
Muffaddal Jawadwala
CS & LL.B
Peninsula Business Park, 19th Floor,
Tower B, Lower Parel,
Mumbai - 400013
We at MGB, help businesses achieve their potential by providing the necessary support and endeavour to deliver results
that match your business needs.
Connect with us to understand the above benefits better.
© 2020