Coronavirus impact: Nasscom suggests measures to lessen burden on startups

Nasscom has put forth various suggestions to the government, which can address the immediate concerns of startups like cash flow and taxation burden.

28th Mar 2020
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The nationwide lockdown to combat the threat of coronavirus has resulted in a freeze of economic activity and Indian IT industry’s trade body – Nasscom has sought urgent remedial measures from the government to lessen the burden of startups.

A statement from Nasscom said, “The COVID-19 pandemic has caused high stress on startups, putting their continuity at risk. They are looking to governments to provide support and relief.”
coronavirus impact


Nasscom has raised a host of critical issues currently plaguing startups, which deal with cash flow problems, concerns around taxation compliance, need for flexible credit mechanism among others.


The following are the key concerns raised by Nasscom:

Rental subsidy for government-owned workspaces: Startups are facing time loss and project delays due to the prevailing circumstances; this has contributed to financial pressure on startups.


Regulatory compliance: Blanket suspension of all deadlines including tax payment deadlines and filing deadlines until at least four weeks post lifting of lockdown in all cities. Also, waiver of interest and penalties for delayed payments of TDS and GST.


Financing options: To tide over the liquidity crunch created by the pandemic and ensure timely payment of salaries to employees, the banks may voluntarily provide for an overdraft facility/interest free and equity convertible funding to startups, subject to requisite due diligence on credit history and cash flow constraints.


Cash flow and working capital issues: All outstanding tax refunds (both direct and indirect tax) should be refunded within the next 15 days. The Government should consider paying the GST tax collected from start-ups back to them as a capital funding/loan.


The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme should be extended to startups on a war footing. It will help them manage cash flows and stay afloat as all VC funding will dry up at least for the next three quarters.


Allow access to collateral free loans/line of credit in nominal amount through PSU banks to MSME/SME/DIPT certified/affiliated startups based on their previous GST returns.


Norms relaxation with respect to loans: Postponement of interest payment by a quarter and regularisation of loan in 12 months, thereby reducing the cash flow load for this financial year.


Interest rate of all existing loans, disbursed by banks and financial institutions to start-ups, should be reduced by 3 percent. Also an interest subvention of 5 percent for all working capital loans to startups should be provided.


Procurement of Make-in-India software products: Governments and PSUs to be encouraged to procure Make-in-India software products (to meet at least 40 percent of the procurement requirements) as opposed to custom software development.


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