FINANCE Minister Nirmala Sitharaman Tuesday announced a series of regulatory and compliance related relaxations for taxpayers, MSMEs, company directors and bank customers, but said the government was readying an economic package on priority in the wake of the coronavirus lockdown and would present it ‘sooner than later’.
“Work is going on and we are very close to coming up with an economic package, which will be announced sooner rather than later,” Sitharaman said. On the volatility in the financial markets, she said, “…all the regulators, the Reserve Bank and the Ministry of Finance are all working together… we are in contact… let me give you (that) assurance that monitoring is happening thrice a day.”
Announcing a string of compliance-related relaxations, she said, “Many statutory and compliance issues, since we are in the month of March, we need to address. We have come up with comprehensive announcements in this regard.”
In a significant relief for
Micro, Small and Medium Enterprises, the Finance Ministry raised the threshold default by 100 times for companies being taken to Insolvency and Bankruptcy Code (IBC) to Rs 1 crore from Rs 1 lakh now. This will prevent triggering of default in stress situation caused by Covid 19. Slump in cash flows resulting from lockdown across the country is expected to put a number of companies in a precarious financial position, forcing lenders to take them to National Company Law Tribunal for resolution.
“If the current situation continues beyond 30th of April 2020, we may consider suspending sections 7, 9 and 10 of the IBC 2016 for a period of six months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default,” Sitharaman said.
Sections 7, 9 and 10 of the IBC deal with initiation of insolvency for a company by a lender, and operational creditor or the company itself, respectively. Experts said that move was necessary as there would be many companies defaulting on obligations due to the impact of the coronavirus outbreak on businesses. However, this is expected to be negative for lenders and banks as they may face difficulty in recovery of loans.
“There is an expectation of a high level of default. Most people were taking companies to NCLT at the drop of a hat,” said Abizer Diwanji, financial services leader at EY. Allowing a “deluge” of cases to come into the insolvency process would defeat the purpose of the IBC which was to resolve distressed companies, he said.
The government extended deadlines for income tax and Goods and Services Tax (GST). The deadline for filing monthly GST summary returns due in March, April and May was extended till June 30 with no interest, penalty and late fee for those with turnover below Rs 5 crore, and a reduced 9 per cent interest on taxpayers above Rs 5 crore turnover threshold from current 18 per cent. The deadline for filing I-returns for financial year 2018-19 and that Aadhaar-PAN linking has also been extended to June 30 from March 31.
The government has also extended the ‘Vivaad Se Vishwas’ scheme till June 30 from the March 31 deadline. Earlier, availing the scheme beyond the first March 31 deadline would have resulted in additional 10 per cent tax (with second deadline of June 30).
On the consumer banking side, the government provided relaxation to debit cardholders to withdraw money from any bank’s ATM without paying extra charges for next three months, while fee for maintaining minimum balance in bank accounts have also been waived for this period.
To queries on relaxation in non-performing asset classification norms and some leeway for people paying EMIs, Sitharaman said those decisions will be taken in due course. “A multi layered (task force) — including MPs, experts, industry participants — is working and analysing all suggestions and developments. An economic package is being worked out. Sooner, we will come out with that,” she said.
With regard to compliance that companies have to make under MCA-21 registry, the government has issued a moratorium from April 1 till September without payment of any late filing fee. The mandatory requirement for holding meetings of Board of Directors has been relaxed by 60 days. Applicability of Companies (Auditor’s Report) Order, 2020 will now be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20.
Sitharaman said these relaxations are being provided so that people do not have to worry about compliance as they help the government in tackling the coronavirus. The government has also relaxed requirements for companies to maintain deposit and debenture redemption reserves. For new companies, which are required to file a declaration for commencement of business within six months of incorporation, an extra six months would be given.
Further, as per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For 2019-20, if the independent directors of a company have not been able to hold even one meeting, it won’t be considered a violation.
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