India Considers Easing Tax Rules, Loan Repayment amid COVID-19

Posted by Written by Dezan Shira & Associates Reading Time: 2 minutes
  • The Indian government is contemplating tax breaks and easier loan repayment options for small and medium-sized companies (SMEs).
  • Countries across the world, including the US, Germany, Indonesia, and Australia are considering similar policy changes to combat the economic impact of COVID-19.

The coronavirus (COVID-19) outbreak continues to affect supply chains, industries, and business operations in India. As the country braces itself for the economic fallout of the virus, India is considering offering tax breaks for SMEs and easier loan repayment options.

So far, the government has not announced any relief or policy changes.

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The move, if made by the Indian government, would follow countries round the world such as Germany, Australia, and Indonesia who have all taken similar steps to combat the impact of COVID-19 on their respective economies.

US President Donald Trump announced earlier in the week that he is looking at a potential US$1 trillion stimulus plan that could include assistance for small businesses, relief for the airline industry, tax cuts, and even a cash payment of US$1,000 or more for Americans. (However, Trump will have to negotiate a deal with the US Congress to implement this.)

What the policies could look like?

According to media reports, the proposal by the Ministry of Finance includes rescheduling loan payments, removing the goods and services tax (GST) for companies operating in the hospitality and tourism sector, relaxing bad-terms norms for small businesses, and loan repayment for commercial vehicle aggregators.

Like other economies across the world, India needs to focus on easing relaxations to keep households, micro, small and medium enterprises (MSMEs), and industries afloat in order to avoid slipping into a recession.

According to a 2018 report by the International Labor Organization, 81 percent of the Indian population making a living by working in the informal sector. As per the official estimates, there are about 63.05 million micro industries, 0.33 million small, and about 5,000 medium enterprises in the country.

Apart from bailout for MSMEs and other industries, the finance ministry is also considering a rescue package for the aviation sector worth US$1.6 billion, as per media reports. It is expected to include temporary suspension of most of the taxes levied on the sector. The government has not announced details of the package yet.

Follow the latest India COVID-19 updates here.

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for business support in India.