NASSCOM seeks relief for startups, SMEs from Covid-19 lockdown impact

NASSCOM seeks relief for startups, SMEs from Covid-19 lockdown impact
Photo Credit: Reuters
30 Mar, 2020

The National Association of Software and Service Companies (NASSCOM) has sought relief measures from the government to protect startups and small and medium enterprises (SMEs) during the Covid-19 lockdown.

The trade industry body has urged the Centre to implement measures such as tax payment exemptions, provident fund contribution, availability of working capital, prevention of job losses and demand creation for the industry.

“The Covid-19 pandemic has caused high stress for startups, putting their continuity at risk. They are looking to governments to provide support and relief,” the trade body said in a statement.

On Tuesday, the central government announced a country-wide 21-day lockdown to implement social distancing as a measure to limit the spread of Coronavirus. Due to this, almost all businesses have begun to operate at minimal capacity utilisation, thus taking a revenue hit.

Read: Gig economy comes to near standstill as Covid-19 pandemic accelerates in India

Earlier today, the government refuted news reports which claimed that the lockdown may stretch beyond April 14. Although there has been a consistent surge in the number of positive cases in the country despite the lockdown, the government said the pandemic will be contained in the given timeline. As of Sunday, India had a total of 1,024 positive Covid-19 cases, of which 95 were cured and 27 led to deaths, according to the World Health Organisation (WHO) website.

The NASSCOM wants the Interest Subvention Scheme be applied to startups to help them avail a reduced interest rate of 3-5% for all working capital loans.

Additionally, it has sought an extension for loan repayments due in March -- startups could pay one-third of the repayment amount in June, it said.  It also wants extensions for payment of advance tax for the quarter ending March 31 till the end of May, and for regulatory or tax-related payments as well.

Banks must also provide interest-free overdraft facility and equity convertible funding for startups, it said.

In case of provident fund (PF) payments, NASSCOM wants a one-time PF opt-out option for startups for the financial year 2020-21. With this, startup employees, especially those in lower salary brackets, can receive all contributions directly to increase their disposable income.

To improve order offtake, the government must push public sector undertakings (PSUs) to procure at least 40% of required software products from domestic startups, the industry body said. This will improve their revenue in the medium term, it added.

For SMEs, NASSCOM has sought a reduction in the turnaround time (TAT) to seven days, under the Credit Guarantee Fund Trust for Micro and Small Enterprises. The time taken from the enquiry of the loan to the actual disbursal is considered as TAT.