NEW RELIEFS ANNOUNCED BY GOVERNMENT OF NEPAL TO COMBAT COVID 19
- Unemployed daily wage earners working in informal sectors shall be employed in public works and cash or food grains to be provided as daily wage.
- Period of lockdown declared as public holidays (as long as it continues) and employers including the tourism sector required to pay full salary for the month of Baisakh as well.
- Extension of deadline for payment of tax and filing of returns to 25th Jestha 2077 (7th June 2020).
- Various corporate compliance deadlines extended to end of Jestha 2077 (14th June 2020).
- NRB has directed banks and financial institutions through the same notice to reduce interest rate on bank loans by 2 % points
- Payment date of monthly or quarterly installment to be recovered in Baisakh and Jestha are extended by facilitating to make payment to the month of Ashad 2077.
With the extension of lockdown to the first week of May, businesses across the nation have come to a halt for almost two months now. Government has introduced a new relief package, although not so different from the last relief package; it has at least provided for some decisions. Though not so concrete, the public may seek to find some relief in them.
A. Reliefs for daily wage earners of informal sector
- The unemployed daily wage earners working in informal sectors shall be employed in public works at local levels, to be executed by the local level or by the state or federal level offices. Daily wage of such works shall be provided in the form of either cash or food grains. The local level shall determine the daily wage rate of such workers within the limits of relief criteria for daily wage earners of informal sectors. The local level should then identify the affected family and prepare the cost estimate. The listing of those family members seeking reliefs shall be made in the Employment Service Center of the concerned local level. If a person who does not come to work or is unwilling to work comes to ask for relief, only food grain equivalent to 25 percent of the salary of the person coming to work shall be provided.
The Ministry of Federal Affairs and General Administration of Nepal shall be responsible for formulating procedures for the implementation of this relief program along with conducting necessary facilitation and coordination. Self-declaration shall be made by a person claiming relief that no one in his/her family is self-employed, employed in any formal sector and also does not have any alternative income. If such declaration is found to be false, the remaining relief shall be confiscated, and the concerned chairperson or member of the ward office shall also be held responsible.
It seems to be quite a relief for daily wage earners and an initiative from the government side. Government has declared to involve the Employment Service Centre in the process but, it must be noted that not all local levels have an Employment Service Centre. Government of Nepal is required to establish Employment Service Centres in each local level pursuant to Section 10 of Right to Employment Act, 2018. However, as of the date, the government has established only three Employment Service Centres: at Kathmandu, Dhangadhi and Biratnagar. Government has not spoken about further establishments and we are yet to see any of its efforts to make this work.
It remains in oblivion as to when shall further programs be introduced for the formulation of this relief. It is notable that unemployed are eligible for unemployment support as per Section 20 of Right to Employment Act, 2018. But it does not surprise the public at all that laws are limited to the papers and the government has failed to take into account its responsibilities while declaring the relief.
- Funds from the Prime Minister Employment Program, Prime Minister Agriculture Modernisation Project, various development programs at local level and COVID-19 Prevention, Control and Treatment Fund can be utilized for providing wages to the above-mentioned relief-seekers. Corona Prevention, Control and Treatment Fund established at local levels can be utilized for this purpose of distributing reliefs from local level. Similar relief funds established at the state level can also provide transfers to these local level-based funds. If the total fund even after the fund transfer is found to be insufficient, the Government of Nepal can also provide funding from the central relief fund to the respective local level depending upon their need.
Any non-governmental organization, any organization or person willing to provide assistance in this regard can do so in coordination with the local level in prescribed areas only.
It is true that the government can formulate rules and as such the government as always has put restriction on private distribution of relief. Given that the public has lost their trust on government owing to rampant corruption and the history where government has always succeeded in hiding at the time of need; this might disturb distribution of relief and slow down the distribution program against the slim chance and hope that government will regulate and distribute relief in proportional and need basis.
- Special provisions shall be made by the local level for pregnant women, persons with disability, elderly citizens staying at old age homes, orphans and other children staying at children’s homes while distributing relief.
- Those people who have lost their work who worked in the informal sector, those who have taken work permits for foreign employment but could not go due to COVID 19 and those Nepali citizens who returned from foreign employment are to be enlisted in the Employment Service Centre of local level district wise. And they shall be utilized in productive work by engaging in the Prime Minister Employment program in addition to employing in Public Construction.
While the government should act proactively and identify all possible alternatives to deal with difficult times like this. It is surprising that the government has not developed a well thought out and planned strategy for relief distribution in times like this and has been struggling to roll out a definite stimulus package.
As the need of relief is urgent, vagueness in relief terms will not relieve those in need.
Given that there are only three Employment Service Centres, the government should also provide for the rest of seventy four districts.
B. Reliefs for Formal Sector Employees
Government has declared the period of lockdown as public holidays (as long as it continues) and has announced that employers including the tourism sector shall be paying full salary for the month of Baisakh as well. For some relief, employers of the formal sector will not be required to make all payment to employees at once. They may pay 50% of the remuneration of the month of Baisakh to their employees at the month end and pay the remaining 50 % after they commence their business. To facilitate those employers who have problems with liquidity to pay as such, Nepal Rastra Bank will make provision for making available loans in convenient interest and refinancing from banks and financial institutions. To make provision of giving convenient loans with mortgages for those large industries who have problems of liquidity and payment of remuneration due to lockdown. Those industries wishing to take loan in this way, should present the details of tax deducted at source in the payment of remuneration until Poush of 2076 which is submitted in the Inland Revenue Office.
There is an impending confusion now that the government has declared the lockdown period as holidays; whether to call the works from home as overtime. Employees may not demand given the situation, but confusion remains. The lockdown period has extended beyond one and half a month and the outcry of businesses, industries, and start ups have been ringing in the air for long enough that the government could prepare a proper relief package. When the businesses require concrete relief, it is upsetting that the government is still lagging and dragging and planning to provide some loan reliefs. By now, the government should have brought such plans already; however this is a welcome relief.
- Those establishments which are registered in Social Security Fund and need to make monthly contributions of employer and employee in the fund, can make the contribution of Baisakh and Jestha of 2077 till the end of month of Ashad.
A deferral will definitely serve as a light relief.
C. Relief in taxation
- All tax exemptions (in Custom Duty to be levied as per Custom Act, 2002) provided in import of medical equipments for treatment of COVID-19 following the recommendation of Ministry of Health and Population so as to supply such equipment to Ministry specified health institutions or area, including face mask, sanitizer, surgical gloves shall be extended till Jestha 14. Misuse of such imported items to be levied with fine amounting to the exempted amount, cost, fees and tax amount.
- Department of Commerce, Supplies and Consumer Rights, and Department of Drug Administration shall monitor black marketing in the equipment imported as per paragraph (a) above.
- Excise duty shall not be levied in purchase of ethanol C2H5OH, raw material for production of sanitizer from domestic industries as prescribed and recommended by the Department of Drug Administration.
- Arrange for non charges in demurrage charge and detention charge in the containers and trucks used in import and export of industrialists and traders.
- Deadline to file Value Added Tax (“VAT”) for the month of Falgun and Chaitra, bi-monthly of Magh-Falgun and second quarter and their details; has been extended to 25th Jestha 2077.
- Deadline to file tax returns as per Section 25d. of VAT Act 1995 has been extended to 25th Jestha 2077.
- Deadline to file advance tax deduction and details for the month of Falgun and Chaitra as per Income Tax Act, 2002 has been extended to 25th Jestha 2077.
- Deadline to file amended estimated tax details for the F/Y 76/77 and second installment as per Income Tax Act, 2002 has been extended to the month end of Jestha 2077.
- Deadline to file excise duty and details for the month of Falgun and Chaitra as per Excise Act, 2002 has been extended to 25th Jestha 2077.
- Deadline for filing education service tax, telephone ownership tax, telecommunication tax has been extended to 25th Jestha 2077.
- Deadline for appeal against decisions of tax officials including custom officials to be extended by 15 days from the day of lifting of lockdown.
Delayed filings would have caused the taxpayers to pay fines amounting from one thousand to more along with interests where applicable. With the inconvenience the pandemic has caused in conducting business and running industries, this is a much awaited relief for taxpaying entities. Earlier, deadlines were extended to Baishakh 25 or month end of Baisakh 2077.
D. Exemption and facilities in business administration and compliance matters
In the complicated situation of COVID 19, the provision for the functions of regulatory and details to be submitted by various companies and entities and the fee for the same are as follows:
- The deadline for submission of details and reports by companies in the Company Registrar Office shall be maintained till the end of the month of Jestha, 2077. Similarly, the deadline for the submission of the documents that is ordered by the office will be the same.
- If the deadline for renewal of license of transport and vehicle driver, renewal of motor vehicles, pollution renewal, renewal of route permit is within the period of lockdown, they can renew it till the end of Jestha, 2077 and the fee to be submitted due to delay in renewal due to lockdown shall be waived.
- If the deadline of the renewal of the organizations established in a private firm, partnership firm, small and cottage industry or Department of Commerce or Department of Medicine Management is within the period of lockdown, the period for renewal shall be extended till the end of month of Ashad. The fee/charge or fine for delay for such renewal shall be waived.
- The public hearing of the Electricity Regulatory Commission for determination of electricity tariff shall be postponed till the end of the month of Ashad.
Company Act 2007 levies fines based on company’s capital structure for late submission of documents.
Deferral in deadlines will definitely serve as some relief. However, as businesses have suffered hugely, the government might need to rethink on the collection of renewal fees as well.
E. Relief in banking, lending and foreign exchange
- Nepal Rastra Bank (“NRB”) shall reschedule and stagnate the classification of loans taken from licensed banks and financial institutions by those business enterprises that have been affected by Lockdown.
- NRB shall increase capacity of existing refinancing to 100 Billion (One Kharba) and reduce rate of interest on loans discharged through refinancing funds. NRB shall also arrange for working capital loan necessary for small and cottage industries to be provided at concession rate.
- Through Notice No. 21/076/77 (“Notice”) dated 16/01/2076 (28 April 2020), NRB has provided relief directing banks and financial institution to provide up to 10% additional current capital loan out of approved limit to those needy business enterprises that provides assurance as of effect on their projects or businesses and financial condition due to COVID-19. Such business enterprises having been affected by COVID-19 may be tourism related businesses and aviation including hotel, restaurant, resort, travel, trekking businesses, vehicles having commercial purpose, small and cottage industries, export industry, entertainment industry, hospital, poultry business, etc.
- The extension period for payment of principal and interest to be paid in Chaitra 2076 and Baisakh 2077 are to be arranged as per necessity for debtors taking loans from banks and financial institutions who have been affected by COVID-19.
- It has been facilitated through the notice of NRB that the payment date of monthly or quarterly installment to be recovered in Baisakh and Jestha are extended by facilitating to make payment within the month of Ashad 2077. On such payment no penal charges or penal interest shall be levied. The payment of principal and interest of every short term loan having nature of working capital that is to be paid during this Lockdown period can be extended up to 60 days.
- Banks and financial institutions shall classify loans and set constant the fund maintained for non-performing loans as well as supervisory and regulatory arrangements until Ashar 2077.
- Banks and financial institutions shall continue providing services through electronic medium and no additional charges upon such services are to be imposed until further issuance of orders.
- Discharge of loans to be provided to private organizations providing health services for treatment of COVID-19 are to be prioritized.
- The policy in regard to providing minimum foreign exchange services necessary for livelihood to Nepali students in foreign countries without any objection letter from the Ministry of Education has been continued until Ashar 2077.
- NRB shall make arrangements for providing relief by providing deductions on rate of interest to debtors paying interest on loans provided by banks and financial institutions in the present quarter.
- NRB has directed banks and financial institutions through the same notice to reduce interest rate on bank loans by 2 % points for the purpose of reducing adverse impacts caused by COVID-19. The fourth quarterly calculation of interest amount for this fiscal year has to be done by reducing the 2% interest rate on the prevailing rate of interest.
However, this relief has not been provided to business related to sales and distribution and refinement of foods, production and distribution of gas, soap and chemicals, business related to distribution of medicine, internet service provider, telecommunication service provider, television service provider, industries related to tobacco and alcohol and hydropower projects on operation.
F. Reliefs related to insurance
- Time extension for renewal of insurance policy has been provided by 15 days from the date of end of lockdown where a written request (including electronic medium) has been made by the concerned insured in case of termination of insurance policy in this special situation caused by COVID-19.
- Time extension for collecting insurance premium for life insurance has been provided till the end of Jestha 2077 and no interest on such period shall be imposed.
- Time extension for renewal of license of insurance agent and surveyor that has to be renewed by Chaitra 2076 and Baisakh 2077 has been provided till the end of Ashar 2077 and no fines shall be imposed.
- Payment of claim shall be provided after the situation normalizes determining actual damage through surveyor where the insurer of non-life insurance submits an application (including electronic means) with claim for payment which is created immediately.
- Where the clearance calculation is remaining after transaction in securities market, such clearance period is to be extended till the end of the month of Ashad 2077.
- The deadline for the submission of details by the companies registered as per Securities Act shall be extended till end of the month of Ashad 2077.
H. Supply of food items:
While giving continuation to the earlier relief package provisioning 10% discount on basic food items supplied through Food Management and Trading Company Ltd. and Salt Trading Corporation Limited, the government has committed to make necessary arrangements to buy the basic food items such as wheat, rice, maize, buckwheat, pulses etc., from the farmers and manufacturers directly, so as to ensure market supply of the agricultural yields.
On the same line, as per this relief package, the government shall make required setup to ensure transportation of milk, vegetables, fruits, fish, egg, meat and other food items to the near market area or to the valley itself. The provision to make 25 % transportation grant available, ensured by previous relief packages, shall be continued throughout the lockdown period. The Ministry of Agriculture and Livestock development shall oversee the implementation, overall investigation and simplification of this provision.
I. Public utilities
- The earlier relief provision of 25% discount to the internet and data package users shall be continued by Nepal Telecom for throughout the lockdown period, and it shall make necessary arrangements to make sure that other telecommunication service providers do the same.
- Nepal Electricity Authority shall continue the 25 % concession to the customers consuming 150 units of electricity in a month. It shall provide 15% discount to the customers sufficing 250 units of monthly electricity consumption. It is required to make necessary arrangements to provide discount or concession on demand cost for the industries shut down during the lockdown period. Similarly, NEA shall keep on providing 50 % discount to the manufacturing industry institutions utilizing over-generated electricity.
- Regarding the payment of electricity, drinking water, telephone service, and internet charge, necessary arrangements shall be introduced to exempt late fee and other fines in making payment of the period from mid-March to mid-June in mid-July 2020.
J. Medical & health sector:
- According to the package, additional budget shall be made available to the Ministry of Health and Population to ensure the supply of medicines, health tools, sanitizer, gloves and PPE, and to extend the capacity of hospitals for the treatment of COVID-19.
- Government has committed to provide medical professionals and other workers engaged in prevention, control and treatment of COVID-19 with compensation or insurance of Rs. 25 lakhs up until mid-July 2020. The provision of making PPE freely available to people in this sector shall be continued.
- For the people with possibility of infection, group quarantine is to be operated and the food expenses incurred there from shall be ensured by co-operation between the federal government, provincial government and local level. In order to make sure that such quarantine facilities are within the set standards, the government has committed to provide additional monetary support.
- Under this relief package, necessary medical equipment is to be made available to the private health service providers, and the government urges these bodies to resume their medical services by providing a minimum 20% discount in service charge until mid-July.
K. Education service:
Government requires the private schools in the country to exempt all other charges except for the boarding charge of the enrolled students. Taking into account the hardship of the service providers, the government commits to simplify the loan procedure for the schools having difficulty in operation due to low working capital.
L. Relating to tenancy and house rent
Addressing the appeal made to the house owners in the city to exempt the rent for a month for the workers working in unorganized sectors, local level shall carry out an investigation of implementation of the appeal. For the tenants, working in areas other than unorganized sectors who lost their jobs due to the lockdown, the house owners are required to reimburse the rent amount after such tenants start earning.
M. Other Policy Provision
- For the provision of taking information of the situation of Nepali Workers regularly, make the role of consular mission effective and by facilitating the destination countries, monitor the situation of workers and take initiative through diplomatic means in relation to the remuneration, facility of the workers.
- To extend the deadline for the public procurement agreement pursuant to Public Procurement Act before the commencement of the lockdown, if demanded. When the deadline is extended as provided, if the deadline for bank guarantee expires in Baisakh 2077, the bank which extended such bank guarantee shall extend the deadline up to one month from the time lockdown will be closed without any additional charge.
- Keeping in mind the effect of COVID 19 in the business sector, the concerned entity will operate additional financial activities for the management of supply of necessary goods, public construction, continuity of basic services and workers who have been unemployed.
Government should bring some concrete reliefs and prepare plans for management of the labor market and economy after this lockdown is lifted and businesses would try to get back to their standing. While there have been multiple representations from various industry representatives and businesses including large as well as small and medium enterprises and startups, requiring the government to bring a stimulus package amounting to at least 5% of the GDP and also sector specific relief packages but the latest announcement has not addressed anything. It appears to be a mere extension of the earlier reliefs announced. While several sources have confirmed that these aspects including the stimulus package will be announced along with the budget, that is due to be announced in few weeks time, we hope that government at least announces its strategy and further action plan to instill confidence and ensure that businesses are not on their own in this fight for survival in these unprecedented times.