The
Union Budget for 2016-17 has been a mixed bag for the Startup Community. While
a lot of announcements have been made regarding startups in India, the
community largely feels a lot more could have been done. Incremental steps have
been taken, but several contentious issues have not been tackled by the Budget.
"This
is a hard working budget. We welcome the move to start rationalizing capital
gains for investments in private companies, which will help create a level
playing field relative to listed companies. However, the silence on removal of
angel tax has been deafening," says veteran entrepreneur and Indifi
Technologies, Co-Founder, Alok Mittal.
Think-tank,
iSpirit, said that it was disappointed with no attention being given to easing
taxation norms of software companies where there is significant friction, the
confusion on "goods" verses "service" tax on online
downloads, TDS on sale of Software products and competition from foreign
selling B2C products without any tax in India. It added that there is a lot
more that could be done to incentivize innovation and specifically ease the TDS
conundrum which start-up and product companies
find themselves adversely caught in.
In
a tweet chat Chairman & Co-Founder of Frictionless Ventures and Chair-
Product Council, Nasscom, Ravi Gururaj says, "Tax holiday good, but MAT
not helpful. Capital gains holding period of 2 year helps but 1 year would be
better." Replying to a tweet that the Government seemed lackadaisical when
it comes to emerging tech, Gururaj added that it was not fair to call out as
lackadaisical. "Government's heart is right, but policy is a slog,"
he said. Below are the reactions from the Startup community in the country:
Mohandas Pai, Advisor, iSPIRT,
Chairman, Manipal Global Education Services and Aarin Capital :- The Government continues to incentivize the
start-up ecosystem as we have seen in the recent budget pronouncement. I am
glad that the Government clearly recognizes that start-ups can be powerful
problem solvers for the myriad issues facing the country and in turn generate
employment as well. The Government's decision to allow for 100% deduction of
profits for 3 out of 5 years between April 2016 and March 2019 is certainly a
welcome step that will boost start-ups.
Padmaja Ruparel, President, Indian
Angel Network:- Capital gains
Tax exemption in regulated / notified fund of funds & lowering the period
from 3 years to 2 years for definition of Long term Capital Gains in unlisted
companies are both welcome. We had hoped that treating investments by AIFs and
angel groups in unlisted companies would be aligned with the public market
equity tax regime. We also welcome the SETU fund of Rs. 1000 crore to boost
innovation and incubation and the one day registration process for start-ups
will all help the eco system to grow.
Vishnu Dusad, Co-Founder & Governing
Council member of iSPIRT & MD, Nucleus Software:-While there are no major sops announced for
the software product industry, the Government must understand that incentives
to this segment of the industry will result in an exponential leap in exports
and place India in an unshakable position on the world software product stage.
That said, the decision to tax the Royalty Income from Patents developed and
filed in India at only 10% is a good move by the Government and will certainly
encourage companies to develop and file more IPR in the country
Arun Lakhani, CMD - Vishvaraj Infrastructure Ltd
:- $The union budget 2016-17 is a step
forward for the welfare of the people and growth in the country. For the
infrastructure development the government has announced fund allocation of at
Rs. 2.31 lakh crore that would aim to enhance the infrastructure base of the
country.
Guideline
for renegotiation of PPP contracts is a long standing demand from international
investors and will make the investment environment much more risk neutral. It
is a a big step towards overseas funding comfort for PPP in infrastructure. The
228% higher grants to gram Panchayats & urban local bodies in accordance
with FFC recommendations will augment development process significantly in
terms of providing basic facilities like clean healthy water, sanitation, and
other basic amenities leading to smart towns of future.
This
budget restores balance in Rural Bharat and India Inc. The approach of the
Finance Minister is one of quantum jump rather than tinkering, which would
accelerate the development process and put the Indian economy on a sustainable
growth trajectory, while further expediting the "Make in India"
programme and 'Swaach Bharat Mission'.
Saurabh Srivastava, Co-Founder, Indian
Angel Network:- The 3-year tax
exemption for startups is indeed a positive move that will reduce compliance
burden and cash outflows, allowing ventures to invest in product development
and scaling-up the businesses. Exemption from capital gains tax is an expected
move from this year's budget and will encourage more high risk investments into
the ecosystem. However, would have been great if capital gains tax regime for
unlisted companies was aligned with that for listed companies at least for
investments made by SEBI registered AIFs. This would end the discrimination
against domestic venture capital funds ( AIFs) as foreign funds anyway pay no
capital gains tax by investing from Mauritius and other treaty friendly
countries. By enabling one-day registrations for start-ups , the Government has
focused on bringing in ease of business for the ventures. Many countries in the
world do this already and, with the user of technology, I am sure this will get
implemented expeditiously."
Sharad Sharma Co-Founder &
Governing Council member of Ispirt:- Start-ups
in the country will certainly benefit from the budget announcement of amending
the Companies Act to announce easier and swifter registration of companies.
Another positive announcement from the budget speech by Arun Jaitley has been
the focus on Aadhar for subsidy delivery. The Aadhar powered India stack from
authentication to execution, coupled with the open API policy in India, can certainly
transform the way in which digitally focused companies can reach the masses
quicker and more effectively.
Vijay Shekhar Sharma - Founder and
CEO, Paytm:- I am really happy
for Aadhar and IndiaStack. Finally, the government has provided legislative
backing that will unleash the full potential of such an incredible platform.
With the focus on digital payments and incentives to startups, the Finance
Minister has boosted our Prime Minister's Digital India and Startup India
plans. Overall, the budget creates a strong foundation for sustainable growth
in rural & urban India. Steps to further improve Ease Of Doing Business
will drive entrepreneurship which is essential for job creation.
Gaurav Bhatnagar, Managing Director,
Travel Boutique Online:- A lot more
could have been done in the budget for startups. The three year tax holiday is
hardly going to be of help given most startups don't make money in initial
years. Reducing the holing period for capital gains on shares of private
companies is a welcome move. However, it might not be sufficient to prevent the
rampant externalization of funded startups. The tax rate on long term gains on
VC/angel investments needs to be rationalized since these investments carry far
higher risks compared to investing in listed equities where LTCG is zero (in
lieu of STT payments). Finally, I haven't yet reviewed how a
"startup" would be defined to qualify for tax incentives etc but ideally
raising any amount of capital shouldn't be part of the qualifying criteria. It
puts bulk of the entrepreneurs at a great disadvantage. Yashish Dahiya,
Co-Founder & Director, PolicyBazaar.com
Startups
do not make profits in the first 3 years, but reducing the holding period for
Capital Gains 2 years from 3 will be helpful. However, I thing the reduction in
corporate tax for Small companies at 29% + cess would be irrelevant for
start-ups. Lastly, I think there will be no major change in the startup ecosystem.
The encouragement is good, but practically nothing has changed.
Shekhar Dasgupta, Founder, GreenField
Software Pvt Ltd:- The announcements
are at best just good intentions. The devil is in the implementation. Let me
give an example why India does not have a good support system for startups from
the Government.
PSU
and Government tenders repeatedly specify, for certain categories, products by
name from foreign vendors, usually large MNCs. Although India-made products
meet the specifications mentioned in the tender, they cannot be quoted as they
were excluded in the named category list. All Indian vendors, including SMEs
are thereby excluded from even participation, forget about getting the
business.
In
such a scenario, reaching revenue thresholds for taxation purpose for a
technology "product" company is really a moot point - if is relying
on domestic market. All announcements for the SMEs appear like putting lipstick
on a pig.
Abhinav Mathur, Director Talentiser
Labs – Jobick:- The starting of a
company in 1 day is great. However, closure of a company within a reasonable
time is equally important. For the part on income tax, it should be exempt for
a period of at least 5 years or on the recommendation of an auditor basis the
business model of the company and depending on the losses being incurred. The
holding period for capital gains should be reduced further, especially if a 50%
of the Capital Gains are being invested back into startups. However, the
silence on angel tax is a major concern area and should be explained clearly.
The FM could have done much more.
Chiranjiv Patel, Incoming Regional
Director, Entrepreneurs Organization, South Asia:- This budget is a populist one and overall
clearly defined for the lower class, middle class, and higher class. Various
initiatives in the budget are a significant boost to all startups business
entrepreneurs and new manufacturing companies. The budget also taxes the riches
and high-income people (nothing major for them) heavily, with passing benefits
to lower class and middle class will be an attempt to balance the economy.
Service tax exemption for housing will be a significant boost for home buyers
and for the overall growth of the sector. This budget seems to be making an
effort to create an agro economy as well. Considering all the initiatives by
the finance minister, the Union Budget 2016 aims at jobs creation, rural
development, and structural transformation which will lead to overall growth of
the economy.
Alok Saraf, Partner - Private &
Entrepreneurial Group, PwC India:- This
budget is a Budget for the M&SME sector with various policy measures and
tax incentives focusing on their needs. Policy measures on encouraging
entrepreneurship, enhanced spending on rural development and infrastructure
including on roads and railway, focus on developing one crore skilled workforce
could be a big boost to the sector. On the tax side, tax holiday to start-ups,
lower tax rate of 25% on new manufacturing facilities and increasing turnover
threshold to Rs 2 crore for presumptive tax rate of 8% are all welcome moves
for the sector. A thumps up from the sector.
Kiran Murthi, CEO, AskmeBazaar :- The Finance Minister has presented a business
friendly budget which is encouraging for young and fast growing India. Taking
the "Start-up India" action plan forward, the budget allocated Rs.
500 crore for SC/ST & Women entrepreneurs. The announcements made during the
budget also include a 100 % tax exemption for 3 years for start-ups, which is a
welcome step. The Minister also proposed an amendment of Companies Act to allow
new start-ups to register in one day. These steps will help to creat a
favorable business environment in the country.
Rahul Agrawal, Ceo and Co-Founder,
MebelKart :- Budget 2016 comes
with a huge boost for start-up ecosystem. The government fund announced today
will provide SC/ST and women entrepreneurs with easy access to funding. Budget
2016 focuses a lot on ease of doing business. With tax exemption in the first
three years and ease of registering business, it becomes easier for start-ups
to focus on growth in their critical years.
Sheetal V Talwar, Chairman &
Managing Director, Vistaar :- I
think the steps towards Startup India are measures in the right direction. It
will offer youngster an opportunity to set up businesses without having to
worry so much about cumbersome compliance sand focus on building businesses.
Each of the initiatives shoes this government and more than that MoS Jayant
Sinha's understanding, empathy and identification with start ups and
entrepreneurship.
Ishan Singh, REV - Re Capital Ventures
:- Starting a company in 1 day is good,
but It is not just company name incorporation - we need same day real time
issue of PAN/ TIN numbers. The holding period for Capital Gains should also be
one year to bring parity with listed shares.
