Another Budget by the NDA Government is Up for the Offering and the Air is Again Thick with Expectations. Like All Years, Every Industry Group is Busy Preparing Wish List, Which Generally Boils Down to a Single Point Agenda of Reducing Tax Rates & talk of Level Playing Field and How this Single Reform i.e. Tax Rate Cut will Catapult their Industry to Leading Position in the World, Generate So Many Jobs, Add So Many Basis Points to the GDP.

Hi Everyone Today We Will Talk About The Expectations of the Startup Ecosystem from Union Budget 2017

While the Budget is Going to be Presented on 1st Feb 2017 by Arun Jaitley. Meanwhile Our Finance Ministry is also Concerned about Worsening Position of Fiscal Deficit, Poor Tax GDP Ratio and Need to Collect More Taxes in Order to Provide for Poor and Why the Government Needs to be Now Ready for 8th Pay Commission. Indeed it’s a Very Tough Scenario for the Finance Minister to Keep Everyone Happy.

The Present State of Startup Euphoria Started in 2006 and Saw Building of Iconic Companies like Flipkart, Paytm, Redbus, Citrus Pay and Thousands More with Billions of Dollars Getting Pumped in these Startups till the Government took Notice and Last Year We Saw Launch of Big “Startup India Conclave”. The Single Minded Focus of the Government was to Improve Ease of Business and Create Conducive Environment for Startups.

Issues If Startup Industry

Number of Startups is Down by Some 67% in Last Year Alone. The Number of Tax Notices Issued to Startups Last Year Exceeds All Notices Issued in last 10 Years. Earlier there was a Tax Only if a Company Used to Post Profit, Now Startups are Even Taxed On Investment Raised (Only Country in the World to Do So).

With Startups often Hitting Regulatory Roadblocks Under the Heavy Hand of Archaic Laws, Entrepreneurs & Investors are Hoping that the Upcoming Union Budget will Loosen Up Some of the Policy Imbalances Mooted in the Startup India Programme.

Innovation is Always Ahead of Regulation, Government Should Transform the Roadblocks to Ensure the Growth of the Country.

Here are Some of the Major Expectations that Industry Stakeholders have from Budget 2017:

Sandeep Aggarwal

– Founder, ShopClues &Droom

When it Comes to the Current Economic Scenario at a Micro Economic Level, the Government should Assist the Growth of the Startup Industry by Creating an Autonomous Business Landscape for Entrepreneurs. Entrepreneurship, by Itself, Is a Very Demanding Career for an Individual, & Minimizing Government Intervention can Help them to Achieve Success. Internet can Become a $3 Trillion Industry as it was Designed to be Autonomous & Free by Nature.

India Must Enhance Various Policies to Ensure that Capital is Easily Accessible to Entrepreneurs. Government should Not Intervene when it Comes to Funds or Bank Loans. Rather, Entrepreneurs should be Provided Easy Access to Seed Funding, VC Funding & Angel Funding.

Others Include:

  • No Capital Gain for Any Kind of Startup Sale or Exit.
  • Giving R&D Credit if Someone is Making Innovative Tech Product.
  • The Government should also Make Foreign Listing for any Indian Company Straightforward, Rather than the Company having to Incorporate Itself in Every Country Individually.

Lalit Jain

– Co-Founder VP, Sales & Marketing, CresTech Software Systems

If the Income Tax can be Levied in an Incremental Way on Startups, this will Give a Boost to Startup Ecosystem and Shall be Beneficial for Country in Long Run. For Example, Starting from 0% Tax in 1st Year, Tax can be Increased by 5% Every Year till it Matches the Prevailing Rate.

Rajeev Jain

– CFO, Intex Technologies Ltd

The Mobile Handset Industry is Growing Fast. India is Moving towards a Digital Economy & Mobile Banking. Smartphones Will Play a Crucial Role in Supporting this Vision. The Recent Demonetisation Reform by the Government has Further laid the Ground for Setting a Cashless Economy. The Entire Country is Looking forward towards Mobile Banking which Shall Create a New User Base and Fuel the Growth in Mobile Industry.

As an Industry, We Expect a Long-term & Stable Policy on Mobile Manufacturing in India. The Industry has Huge Potential and can Supplement Government Initiatives of ‘Make in India’ with Highly Technical Product if Focused. Incentives to Create Sufficient Technical Manpower Will lay the Foundation of a Strong & Robust Manufacturing Base in India.

The Regulations Should be Modified to Keep up with the Innovation

Further, A Clearly Laid Out Research & Development (R&D) Policy is Necessary to Succeed in A Highly Technical Industry like Ours and Will Help bring Component Manufacturing Base in India to Save Precious Foreign Exchange. In the End, to Create a Truly Inclusive Digital Economy, Affordable Mobile Handset or Consumer Durable Items up to Certain Value Should be Given a Concessional Duty Treatment.

Chandan Deep Kaur

 – Manager, International Tax & Regulatory, BSR Affiliates

Modi Government’s Flagship Initiative ‘Startup India’ has Completed 1Year. The Initiative Made a Decent Beginning and Various Incentives and Schemes, Including Tax Sops, Were Introduced to Create a Conducive Ecosystem for Startups in India.

To keep the Momentum Going, It is Imperative that Necessary Impetus is given to Startups in the upcoming Budget in the form of Required Tax Incentives and Simplified & Faster Procedural Clearances.

  • Increase in the Tax Holiday Period from 3 Years to 7 Years.
  • Exemption from Liability to Pay Minimum Alternate Tax (MAT).
  • Relook at Carry Forward of Losses Despite Substantial Change (that is, more than 51%) in the Shareholding Structure Would Enable Better Cash Outflow for Startups.

There has been a Growing Concern Over the Notices being Issued by Income Tax Authorities to Various Startups for Payment of ‘Angel Investment Tax’. The Government Needs to Provide Necessary Clarity for Invoking Anti Abuse Provisions

Hemant Kohli

 – Co-founder & Chairman, mPayGo

Startups Urgently Need ‘Single Window Clearance’ On Issues Involving Regulatory Clarity. This Ambiguity Leads to Startups Moving Ahead in a Wrong Direction. At Least the Concerned Regulator or Authorities Should Get Activated and Work on these Issues Proactively.

Shoba Mohan

– Founder-Partner, RARE India

Being in the Travel & Hospitality Business, One of the Most Debilitating Issues is Taxation. It Inflates Costs at All Levels and Makes Programs for India an Expensive Proposition – Both for Indians As Well As Foreign Travellers. Tourism Industry has been Kicked Repeatedly in the Teeth by too Many Factors and We have been Waiting Endlessly for the So Called ‘Ache Din’.

For a Change, It would be Good to See a Buoyant Budget that Can Spur Growth. Tax Cuts for those Promoting Eco-tourism, Conservation Hospitality, Community & Nature Based Concepts, Especially those that Help Create Opportunities in Offbeat & Rural Areas should be Rewarded. Also, those Who Work on Low Impact Tourism Should be Given Tax Benefits & Financial Subsidies, Encouraging More People to Conserve & Convert their Decrepit Forts, Palaces & Heritage Sites into Hospitality Concepts.

Startups Are The New Farmers

Overall, it seems that Startups have been placed in the Same League as Farmers have been. In Management Jargon, Startups can be termed as the New “Farmers”. In India, for last 60 Years, Every Government and its Budget have 1 Singular Focus – that is to Work for Farmers and Improve their Conditions.

Billions have been Spend on Doing that with Schemes, Loans, & Policies. What is the End Result? Everyone Connected with Farmers, Be it Experts, Professors at Agriculture Universities, Ministers, Agencies, Bankers have Flourished Except Farmers. Farmers have Continues to Suffer and Battle Perpetual Poverty and Commit Suicide while Government Focus on Farmers in terms of Money and time Keep Increasing.

Likewise Government Focus on Startups has brought a Windfall on All Stake Holders – Be it Consultants, Bureaucrats, Bankers, Event Managers among others, except Startups. The Consultants have been Empanelled, Lobby Groups have been Formed, Nodal Agencies have been Constituted, Huge Budget Allocations have been Done with Crores being Spend in AD Campaigns, while Startup Founders and Fund Managers are Busy Justifying Valuation to Tax Authorities and being Made to Feel like ‘Hawala Operators’.

There are Now Rules, then Representations, then Modifications and Addendum and then more Notifications with Every Organ of Government at Central and State Level trying their Best to Add Value and Contribute their Set of Rules to Already Muddled Water of Startups. Probably, the Only thing Pending from the Government is Levy of Startup Cess on All Investors and Startups.

Prime Minister Narendra Modi in his Address to NASSOM in 2015 Famously Remarked that Success of IT Sector in India is Not Because of the Government but inspite of it. Modi Ji Added that as Government had No Clue of IT Sector, by the time it Figured Out the Sector, It had Grown in Size Multifold and Become too Big to be Disturbed. Likewise, Startups were on a Growth Path till Government Took Notice of It.

India Accounted for 35% of Global GDP Until 1615 AD, And Currently Only Occupies 3.5 to 4% Share. We Strongly Believe that Startups & Digital Economy have the Potential to take back India to 20% by 2025. The Focus, therefore Should be On Helping Startups & Fuelling the Industry with Good Policies, Whether it is Incentivizing Investors or Making Favourable Cost of Capital Laws, or Having Institutions Teach Entrepreneurship or Celebrating Failure.

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