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Budget Expectations 2015: Online Service Tax Relief, GST, Startup Fund & More


Finance Minister Arun Jaitley is scheduled to present the NDA government’s second Union Budget on February 28, 2015. Here are the budget wishlists of digital companies across sectors.

On Tax Relief, Online Service Tax and MAT:

Rishi Gupta, MD and CEO, FINO PayTech: “Incentives and tax relief support to financial inclusion enabling entities will help companies innovate and develop a robust technology-based banking infrastructure across the country. They are keys to making digital India a reality.”

Sitakanta Ray, co-founder, MySmartPrice: “E-commerce will grow if the ministry takes cognizance of IAMAI’s recent submission and implements affirmative actions pertaining to FDI. Also, a relaxation of corporate tax for startups and provisions to increase venture capital investments from abroad will help young startups grow.”

Suresh Sharma, Founder & Director, iSpyPrice.com: “Abolishing service tax on online advertisements to motivate internet-based publishing companies to create valuable content and applications for websites will be helpful. It would also be great to see proper clarifications on service tax levied on advertising income that is earned by Indian publishers in foreign currency along with Minimum Alternate Tax abrogation from the e-commerce landscape.”

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Saahil Goel, CEO & Co-Founder, KartRocket.com: “An unlisted Pvt. Co. has to pay MAT @ 18.5% if the company is making a substantial amount of income under Information Technology Act, even though the company is in loss as per the books. This money could have been utilized towards the growth of the company or for financing its working capital requirement. The government can make provisions where the startups either don’t have to pay MAT for initial 3-5 years or the rate of MAT is reduced for such period. An amendment to this effect will surely be welcomed by startups based in India.”

Vivek Sood, CEO, Uninor: “Rationalization of taxes and levies will help the sector to sustain the cost pressures. Telecom sector is impacted by multiple taxes and levies such as Excise duty, Custom Duty, Service Tax, Revenue share, spectrum charges, TDS, etc. The tax regime needs to be relooked so that the service provider is not burdened and growth of LTE and 3G in the country is ensured.”

Subhash Agarwal, MD, Cheers Devices: “Mobile and Technology Industry wishes for tax holidays, interest subsidies on investments to help increase India’s share in mobile phone manufacturing from the current 3 per cent. Tax rebate policies and manufacturing and infrastructure reforms will only boost the present condition.”

Divakar Vijayasarthy, Founder, MeetUrPro: “The provisions of buyback distribution should be strictly restricted to foreign investments routed through tax havens to replace the case of domestic double taxation.”

On GST and FDI:

Subhash Agarwal, MD, Cheers Devices: “We are hopeful for the GST bill to be passed in the forthcoming budget which will open up wide avenues for the states. Moreover, we are also positive about the policies to take shape for the e-commerce industry given the fact that the revenue generation of the mobile industry is being hugely supported by the e-commerce websites.”

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Saahil Goel, CEO & Co-Founder, KartRocket.com: “A roadmap on introduction of GST would surely excite the SMEs and retailers. Heterogeneous State laws in case of VAT  makes it next to impossible for online retailers to ship the goods to their end consumer as courier companies do not carry the consignment unless proper forms are attached . For a small retailer who is selling online, adhering to such regulations becomes tough. Also, there still seems to be some confusion in case of levy of service tax and TDS on online advertising and overall taxation for online businesses.”

Ashish Goel, CEO & Co-founder, Urban Ladder: “Two of the biggest expectations from the budget are clarity on FDI in e-commerce and simplification of the indirect tax regime – by introduction of GST (Goods and Services Tax) as a unified indirect tax. An effort to reduce state wise differences in indirect taxation will simplify pan India operations for many companies.”

Ashish Sood, Co-founder, Youshine: “FDI in retail will boost local businesses.”

Clarity on the Rs 10,000 crore startup fund:

Naidu Darapaneni, Founder and CEO, MeraEvents: “The Rs 10,000 crore startup fund (which was announced during last year’s budget) made available to startups must be clarified and the process for the same must be kept simple, hassle-free and easy. Startups of different stages must have easy access to different levels of funding – seed, angel, series A, and so on just as in Venture Capital Funding.”

Pavan Chauhan, Co-founder & CEO, Meritnation.com: “The government’s meeting with heads of e-commerce companies and startups instills confidence that the coming budget will help accelerate growth in one of the fastest growing digital markets in the world. Internet industry specific Incubation Centers and Start up funds would give further impetus to the growth of this sector.”

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Saahil Goel, CEO & Co-Founder, KartRocket.com: “The declaration was much appreciated but not much information has been shared on how the funds will be utilized by the government. A detailed outline on the same will help startups plan for future and would also promote entrepreneurship at a larger scale.”

Alan D’Souza, Founder and CEO, Vavia Technologies: “After Mr. Arun Jaitley’s session with the CEOs of Indian software and hardware companies, it is quite evident that this year the government is definitely focusing on entrepreneurship and innovation. As a start-up we expect the government to promote investments on IT infrastructure and motivate entrepreneurs to adopt new technologies.  Further to this the sector expects the government to introduce various IT and software parks to promote growth.”

Shankar V, Member of Chennai Angels: “Government had announced an Rs 10,000 Crore start up fund in the last budget. We hope it will see the light of day soon.”

Amitabh Vira, CEO & Founder, NetProphets Cyberworks: “Stressing on thought leadership and enabling a startup fund is important to promote Digital Entrepreneurship ideas under creative thinkers and social scientists instead of bankers and financial analysts.”

On e-commerce:

Sitakanta Ray, Co-founder, MySmartPrice: “We need investments by Indian Post and Indian Railways (logistics infrastructure) to boost growth in the Indian e-commerce scenario.”

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Ashish Sood, Co-founder, Youshine: “The elimination of VAT and sales tax and further clarification on taxes will help fortify the e-commerce sector. Strategic economic reforms and changes in policy framework will help incentivise the Indian retail ecosystem and spell good news for online consumers.”

Digital payments:

Pramod Saxena, Founder & MD, Oxigen Services: “We are hoping that this year government gives Infrastructure status to Payments Industry. Additionally, we hope that government would encourage electronic transactions by giving tax concession to merchants accepting electronic transactions instead of cash and payments fee be exempted from Service tax.”

Startups and angel investor wishlist for the budget:

Shankar V, Member of Chennai Angels: “There are a lot of expectations among startups and angels from Budget 2015. Remove hindrances to doing business, including elimination of Sec 56 (2) vii of the Income Tax Act. Since most start-ups have all the value captured in the IP, and a book value of zero, they will have to pay 33% of every angel round as tax. Also, procedures relating to starting up, winding up etc. are tedious and need to be reviewed in light of  the admin-light nature of start-ups. There is news that “registered startups” will get a Service Tax and VAT Holiday for a certain period; this would be very welcome. There is also news that registered startups could get grants from Government; this would also be welcome. Exemption for Angel Investments from Section 56(2)(viib) of IT Act, which provides that where a closely held company issues shares to a resident, for an amount received in excess of the fair market value of the shares, then the said excess portion will be regarded as income of the Company and charged to tax under the head ‘Income from other sources’.  This provision will inevitably cause problems for startups, particularly IP based ones, as their FMV will always be open to debate by the IT Department at the Angel and VC stage. Angel Associations have long asked for exemption to genuine Angel Investments and have suggested a framework to identify “genuine” Angel Investments. This would be at the very top of our wish list.”

Spectrum crunch:

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Vivek Sood, CEO, Uninor: “Relaxed norms for spectrum trading and sharing, M&As and availability of more spectrum. Since there is a spectrum crunch in the country, limitations with regard to spectrum trading and sharing needs to be removed in order to achieve the objective of efficient utilization of frequency airwaves. Further consolidation in the telecom sector will also be very important to drive overall growth. Relaxed norms with respect to spectrum sharing and trading and M&As is paramount. When benchmarked with the spectrum available for broadband over mobile networks, there is a shortage of spectrum required to provide Broadband for All in India. The government needs to make available more spectrum at a price that can make mobile services affordable for masses.”

Travel & Tourism:

Rajesh Magow, Co-Founder & CEO (India), MakeMyTrip.com: “We expect the upcoming Budget to be favorable to the travel and tourism industry as the Prime Minister has recognized the sector as an important one. There is a pressing need to look at the three main facets of the travel sector in India – Domestic, In-Bound and Outbound – independently and address their issues accordingly. While the prospects for the travel and tourism industry in India are very bright, the industry still faces many challenges. These primarily include lack of world class leisure destination infrastructure, high cost of running airlines due to state levies on ATF, airport taxes etc. Hence, investing in building and developing infrastructure through higher budget allocations to tourist destinations and rationalization of tax structure will help promote travel and tourism industry. Also, we need to strive for better air connectivity as there are many airports available in India but are not operational. If we have the right transportation with hygienic and user-friendly passenger amenities and attractions such as theme parks, more and more tourists will be willing to visit the country. Poor infrastructure is why a majority of travelers prefer other countries over India as they get better value for money there.”

Real Estate:

Mr. Dhruv Agarwala, Co-founder, PropTiger.com: “As far as the realty sector is concerned, there are a number of points on which clarity would be appreciated from the Union Budget 2015-16. Firstly, clarity on taxation policies for REIT.  Though part of the clarity on taxation policy was announced in the last budget, it was not sufficient for accelerating formation of REITs in India. There continue to be some taxation issues, which are holding back foreign as well as domestic investors in launching REITs. Secondly, we seek clarity on Smart Cities. While the government has made several announcements with regard to creation of smart cities and even announced a budget allocation for the same in the last budget, the Union Budget 2015-16 should now go a step forward and outline a framework for identifying and developing smart cities. This will help developers as well as sellers and also help buyers make informed decisions.”

Foreign Venture funds:

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Saahil Goel, CEO & Co-Founder, KartRocket.com: “Currently only Foreign Institutional Investors(FIIs) that are registered with SEBI are allowed to freely invest without taking prior approval of RBI. Foreign Venture Capital Fund are required to take approval from RBI to invest in startups based in India. This takes up a considerable time which makes investment in startups in India unattractive for foreign venture funds. Simplifying this approval system will encourage foreign funds to invest in India based startups.”

Written By

I'm a MediaNama alumna from 2015-16 (remember TinyOwl?) now back to cover e-services like food and grocery delivery, app based transport and policies, platforms and media in India.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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