FM Sitharaman rescues MSMEs from insolvency proceedings amid Coronavirus

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FM Sitharaman rescues MSMEs from insolvency proceedings amid Coronavirus

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Ease of Doing Business for MSMEs: To help MSMEs tide over the possible financial distress due to the onslaught of the Coronavirus pandemic, Finance Minister Nirmala Sitharaman on Tuesday announced raising the threshold for default by MSMEs sharply from Rs 1 lakh to Rs 1 crore under section 4 of the Insolvency and Bankruptcy Code (IBC), 2016. “This will by and large prevent triggering of insolvency proceedings against MSMEs,” said a press note issued by the Finance Ministry. “Now they (MSMEs) can focus on their work rather defending themselves before NCLT to save their business and assets. It will also help the judicial infrastructure as the number of cases to be filed will drastically reduce for the time being,” Rajesh Narain Gupta, Managing Partner, SNG & Partners told Financial Express Online.

Sitharaman also said that if the current situation (due to Coronavirus) continued beyond April 30, 2020, the government may consider suspending section 7, 9 and 10 of the code for six months. “This means that neither the financial creditors nor the operational creditors nor the borrower can file an action under IBC,” said Gupta. This would help businesses focus on stabilising the business and the banking operations instead of “chasing the borrower for recovery which creates a problem at both ends,” he added. Also, it would help reduce the load on judicial infrastructure “as stress for businesses and individuals is imminent in the given situation.”RELATED NEWS

Among other relaxations announced by the Finance Minister included cutting down interest rate from 12 and 18 per cent to 9 per cent charged on delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, securities transaction tax, commodity transaction tax made between March 20, 2020, and June 30, 2020. “The amendment would need to be made to the Income Tax Act for the said announcements to be effective. Though this move will give a breather to businesses who are already battling disruption and uncertainty, appropriate immunity needs to be provided from prosecution provisions,” Jiger Saiya, Partner and Leader – Tax and Regulatory Services, BDO India told Financial Express Online.

The minister also announced extending the date for GST return filing for FY19 from March 31, 2020, to the last week of June 2020 while for newly incorporated businesses, an additional time period of six months is given apart from the existing six-month timeframe within which they have to file a declaration for starting the business. “The extension of GST return timelines in these testing times is a sigh of relief for small players (below Rs 5 crore turnover). However, the government could have treated all industry players at par by not imposing an interest at 9 per cent for the delay in filing returns beyond 15 July 2020, for all other companies,” Gunjan Prabhakaran, Partner – Indirect Tax, BDO India told Financial Express Online.

Source- Financial Express.