2015 was a fast-paced stellar year for Indian startups, as the ecosystem observed significant growth and a torrent of capital flowing from domestic as well as global investors. Over $7.3 billion was invested in Indian tech startups across multiple sectors last year. In fact a very active participation was being displayed by the government itself to fuel entrepreneurship and also created policies to support startups.
Nevertheless, the fact remains that there are still several roadblocks in entrepreneurial journey including taxes, regulatory frameworks, and not to mention, lack of capital. If these issues are addressed properly, Indian startups could really stand tall at a global level.
In its pre-Budget recommendations to the Finance Ministry for startup and eCommerce ecosystem, IT industry body Nasscom also suggested to exempt startups from direct and indirect taxes, including MAT which will help reduce compliance burden and cash outflows for these new businesses.
As we now approach the budget 2016-2017 scheduled to be unveiled on February 29, let’s hear it from startup founders themselves of what they expect from the government.
“Budget 2016 promises to be of great interest to the emerging sectors of India, especially the Indian e-commerce industry. Though the last year’s budget didn’t deliver on the hopes of bringing FDI into online retail, certain steps have been taken in the right direction to instill a sanguine attitude amongst the industry” said, Sitakanta Ray, Co-founder, MySmartPrice.
Similarly, Ekmeet Singh, Co-founder & CEO, Lendbox believes that “a system has to be put in place that encourages foreign inflow of funds so that NRIs and foreign nationals can take part in risk financing in small businesses and individuals in India. Currently, numerous regulations and taxes are in place which restrict the flow of funds from outside India. The returns on investments made in India are any day higher than those in the West. Several foreign nationals are eager to invest but are vary due to the complex process and various regulations by different government agencies. FIIs registered with SEBI are allowed to freely invest without taking prior approvals from RBI. Eased off process and tax incentives have to be given to Investors to bring foreign capital into the country, tax breaks should be given to VCs and Angel Investors to encourage start-up investments.”
Greg Moran, Co-founder & CEO, Zoomcar hopes to see increased funds allocated for smart city initiatives, thereby helping startups in this space.
Likewise, Lokesh Bevara, CEO & Co-founder, 360Ride says, “Keeping the positives of “Startup action plan” event into consideration I strongly feel government should allocate a decent amount of budget for startups. The fund which will be allocated should vary from startup to startup based on the stage in which they are in. Early stage startups need more support with fund. The funds which are allocated should reach startups on time and the process should be clear and transparent without having any hurdles. In ride sharing industry, rules should be revised in such a way that sharing a seat even in commercial format should be allowed. Any rule has and can become an old rule if it is not helping any startups/enterprises in solving the real world problems.”
Government seems to be quite spirited lately in allocating funds for startups, but when and to what extent these are implemented has always remained a question unanswered. Rajeev Pathak, CEO & Founder, Funtoot also opines the same and says “A startup like us would very much like to see execution of funds which were announced earlier. I would suggest that government creates a special venture fund for social sectors like education and healthcare. India is massively challenged on quality of teachers in education and health care infrastructure. I believe that indigenous technology innovations can help transform millions of lives in India. We usually struggle to find funding support from private funds in these two sectors especially on technology front. A government fund will be very much helpful for technology innovation in these sectors.”
The primary matter of concern for startups in India has been taxation. During PM Modi’s Startup India programme, Arun Jaitley said that the Budget would announce a friendly tax regime for start-ups in the country which raised hopes and excitement of entrepreneurs. Commenting on the tax regime, Akhil Gupta, CEO & Founder, Bumper says, “A startup friendly tax regime, minimum interference, easy access to capital and reduced bureaucracy are some of the key factors that can drive the startups into the new era of entrepreneurship. Government should ease the qualification of Angel money, often the lifeline for entrepreneurs. Tax breaks and incentivization to individual investors will be a welcome move. Waiving off service tax for a period of 3 years will give a huge relief to Bootstrapping startups. Scrapping unnecessary paperwork and a fast track documentation process will help save precious time of an entrepreneur, allowing him to expend his energies on the right things.
Incentivising and giving tax breaks to early stage startups will pave way for a new breed of fearless entrepreneurs. Angel investors should be incentivised and given a tax benefit. By providing a waiver on service tax for 3 years can help a startup in their capital requirements. The 2016 budget will be the one keenly followed by the startup community and we can only hope it ushers in a new era of entrepreneurship.”
Revealing his concerns on tax regime for startups, Mukesh Singh, Founder & CEO, ZopNow says “We have been eagerly waiting for a uniform tax structure that GST was expected to bring in. Other than that, simplification of tax laws for startups operating in e-commerce, tax Incentives for employees working in small scale enterprises – including startup, policy framework on supporting startups trying to list themselves with an IPO, would be few of the things we are looking forward to in Budget 2016”.
Here’s what Suman Howlader, CEO & Founder, CarZippi has to say, “We are looking forward for flexibility to decide on the contributing amounts in the areas of provident fund and ESI both for employees and employers. If organizations are allowed to choose ESI vs other health plans, it will be a boon for the startups as they can choose options based on budget and available funds.”
Sidharth Gupta, Co-founder, Treebo Hotels also believes that the Start-up India initiative has set the ball rolling to create a congenial environment for start-ups in the country. “I hope the Union Budget would build on it further to offer relaxations and support in other areas too. In particular, I’d be keen to see service tax relief offered to early stage start-ups. Since most young companies are not profitable for the first few years, service tax and not income tax tends to be a large burden on their financials. I hope government would take cognisance of this and offer part or full relaxation for the early years”
Startups need some real support from the government and are really looking forward to Budget 2016 with optimism and hope. In times when India’s budding enterprises are picking up pace, Budget 2016 should aggressively focus on innovation-led businesses and some encouraging fiscal policies and incentives should be planned with a clear-cut implementation strategy.