The Union Budget 2023-24, the Central Government of India has initiated the Vivad Se Vishwas Scheme aimed at providing relief to the Micro, Small, Medium Enterprises (MSMEs) during the Covid-19 pandemic. As a result, the Ministry of Finance’s Department of Expenditure has undertaken the necessary measures to implement the programme, which shall extend assistance to the MSMEs. The scheme, known as “Vivad se Vishwas-Relief to MSMEs,” shall accept claims until the 30th of June 2023.

Tax Settlement Scheme

The Government of India had launched the “Vivad se Vishwas” programme in the year 2020 to resolve disputes relating to tax between taxpayers and the Income Tax Department. The said programme aims to achieve the speedy and cost-effective settlement of tax disputes, prevent litigation, and augment the government’s revenue. The Central Finance Minister, Nirmala Sitharaman, announced during the budget speech that in situations where MSMEs are unable to execute contracts during the COVID-19 period, 95% of the forfeited money due to bid or performance security will be reimbursed to them by the government and government undertaking.

To implement this scheme, the Department of Expenditure issued an order on 6th February 2022 outlining its broad structure. The scheme officially commenced on 17th April 2023. The scheme provides for the refund of performance security, bid security, and liquidated damages forfeited or deducted due to the COVID-19 pandemic. Additionally, MSMEs that were barred for default in contract execution during the COVID-19 pandemic will also receive certain reliefs.

Following benefits will be provided through the scheme to MSMEs affected during the pandemic:

1) 95% refund of Performance security forfeited.
2) 95% refund of Bid security.
3) 95% refund of liquidated damages refunded.
4) 95% refund of Risk purchase amount realised.
5) Debarment revocation of MSMEs due default in execution of contracts in the covid period.

Additionally, no interest shall be paid on such a refunded amount.

The claimants may submit the claims via the webpage of Government e-Marketplace (GEM) website that have been designed for the scheme.The eligible claims will be processed only through GeM.

The following criteria is mandatory for an MSME to receive relief.
1) MSME shall be registered as per relevant scheme of the Ministry of MSME on the date of claim by the contractor/supplier.
2) The original delivery and completion dates specified in the contract should be from February 19, 2020, to March 31, 2022.

The Central Government has taken several initiatives to provide financial assistance and relief to the MSME sector during the COVID-19 pandemic like Emergency Credit Line Guarantee Scheme (ECLGS), Subordinate Debt Scheme:, Atmanirbhar Bharat Abhiyaan, Waiver of late fee, PM Saman Nidhi Scheme…etc

-Navneet Shukla