Entering the new financial year, Industries, big and small, are increasingly finding it difficult and, in some cases, impossible to comply with the government’s directive that employees salaries must continue to be paid through the unfolding economic crisis.
Following the government directives to small and medium organisations to pay salaries to employees during the lockdown period, a large proportion of these businesses are unable to do so, due to insufficient funds, cash flow crisis and ensuing default in discharging the contractual payment liabilities.
As the insufficient cash flow is becoming a deep worry for small and medium business owners, some are deliberating either to reduce the workforce or delay/cut salary.
Amidst this situation, Delhi-NCR based Progressive Channels Association of Information Technology (PCAIT) has written to the PMO and Ministry of State and Finance for issuance of directives to customers for releasing the payments of services rendered by these small and medium business. The association has also urged refund of direct and indirect tax to small business entities at the earliest.
Today, IT hardware companies provide pools for million of jobs to skilled, semi-skilled youth of the country. Typically, an average IT trader has 10-20 employees and pays an average salary between Rs 30,000 and Rs 35,000 per month. Whereas, 20 per cent of the SMBs pay salaries through banks and rest of them either pay through cash or cheque. Under this scenario, PCAIT is seeking a respite for small IT traders from the government.
Saket Kapur, General Secretary, PCAIT said, “The aftermath of lockdown is going to impact small businesses in terms of cash flows and ensuing default in discharging the contractual payment liabilities. Unlike large organisations, the capital of a small business entity is divided between stocks in hand, stocks in transit and receivables from customers besides necessary fixed assets to successfully perform the business functions. Hence, in view of fact of loss of business due to lockdown, the Government of India must issue to both private and government enterprises an appropriate directive for immediate payment of confirmed credits to small business entities. Else, there is all the likelihood of triggering of dominoes of payment default, including inability of small business entities to pay the salaries of employees for the period of lockdown.”
He added, “We at PCAIT made a demand for immediate issuance of directive from Government of India to both direct and indirect tax departments to refund to small business entities long pending income tax and GST, with the intent to ease the small business cash flows.”
While applauding the efforts made by Govt of India towards fighting the Corona Virus menace. Federation of IT Associations of India (FAIITA) expressed concerned for smaller partners and submitted a letter to Finance Ministry suggesting measures to survive the business of MSME and IT trade channel. The association has proposed two pronged suggestions by giving a term loan for smaller businesses equal to working capital expenses such as interest, salaries, rents, electricity, etc for 3 months and such expenses can be paid from said term loan repayable in 36 months at a fixed interest rate of 7%.
It further suggested these fixed expenses to be allowed to be capitalised during the current financial year and repayment of term loan be allowed as an expense linked with the repayment period of term loan.
Patna based Navin Gupta, Secretary, FAIITA said,”We are very concerned for our T3 partners and for their business survival. The measures which we recommended to the govt. will help the business continuity of these partners. We are prepared to explain the impact of these proposals to finance ministry or any other person appointed for the purpose.”