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Budget expectations 2018: GST, digital payments, tax benefits, angel tax and more

India’s finance minister Arun Jaitley will present Union Budget 2018-19 on February 1, 2018. This will be a first post-GST budget, so a lot of these Internet biz have common expectations around simplification of GST and relaxation around it.

We asked some of the India’s digital biz companies what they expect from the current budget, they shared some expectations with us touching points like digital payments, tax benefits, angel funding tax, startup boost etc. Read more below:

On Startups 

Swati Bhargava, CashKaro.com: Out of Rs 10,000 crores Startup India Fund, which the Government announced in 2016, only Rs 600 crores has been distributed. Today entrepreneurs struggle with basics like, how the Government defines a startup. The rules around eligibility to claim these benefits are unclear and the approval process is tedious. The new budget should create an environment conducive to business.

Aurko Bhattacharya, ePayLater: Provide incentives and/or guarantees for lenders in the micro credit space to provide loans to small time entrepreneurs in rural and semi urban parts of the country. Currently the tax rebate/’certain tax benefits’ to startups registered under Start Up India is only available to start ups incorporated after March 31 2016. This can be revised to 2015 or 2014. Costs for setting up incubation labs should be considered within CSR. So more companies can set up such labs and everyone can benefit.

On Angel Funding

Subrat Kar, Vidooly: As per the current regulations, angel tax is ambiguous and unfair for startups since it doesn’t factor in the how valuations are arrived at. Government should look at introducing more steps that will aid startups in their early years since the current regulations are not entirely conducive for startups given many startups shut shop in their early years.

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Swati Bhargava, CashKaro.com Angel funding is the first source of encouragement for a startup and tax levied on the same is a major deterrent to its growth. Early stage investors should be spared these old policy measures. A popular scheme to take inspiration from is UK’s Enterprise Investment Scheme (EIS). It protects 61.5% of investors’ investment through generous income tax reliefs as well as an exemption of capital gains tax on returns. If a similar tax relief comes to India, it will encourage investments in Indian startups.

Aurko Bhattacharya, ePayLater: Clear instruction from government for removal of startup funding from the ambit of Section 56 (2) and Section 68 (popularly called the Angel Tax!) of the Income Tax Act.

On boosting digital payments adoption

Charlie Lee, True Balance: India’s fintech industry will expect more policy support from the government to incentivize digital payments and further improve the adoption rate. The budget must account measures to upgrade digital infrastructure and digital literacy in rural India to achieve the above goal.

Rajesh Gupta, Cash Suvidha: Push to encourage the usage of digital or e-signatures for document authentication and to create a complete paperless economy.

Ramki Gaddipati, Zeta: It becomes imperative that it is made easy for people in the lower socio-economic strata to become a part of fintech revolution. For example, people without a PAN number, still have to rely on paper-based Form-60 to complete the account creation process. So, I would request the government to work out a strategy to manage this digitally.

Alok Mittal, Indifi Technologies: Concrete measures for continued push and incentive for digital payments. Expanding the coverage of Mudraa and other credit guarantee schemes to cover new age business models and fintech platforms will help the sector to get more access to credit and digital existence.

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Rajeev Agarwal, Innoviti Payment Solutions: As hardware cost is one of the bigger inhibitors to rapid and sustained expansion of digital payment acceptance amongst smaller retail merchants, we hope the budget takes a close look at options to reduce this friction.

Manav Jeet, Rubique: Budgetary measures such as push towards e-signature usage to verify the documents digitally, e-KYC and to ensure there is a complete paperless on-boarding of accounts; providing regulatory support to fintech organisations trying to simplify and digitize easy credit access to MSME industry, will help in taking India to the next stages of Financial inclusion

On Wattal committee

Sampad Swain, Instamojo: Setting up a dedicated fund to hasten the creation of digital payment infrastructure, I believe the industry will see a huge shift in terms of market penetration. The Watal committee which has proposed the same, is aiming to grow the digital payments from current 5% to 25% of consumption expenditure and cut Cash to GDP Ratio from 12% at present to 6% in three years.

Payment Council of India (PCI): Too wants government to review the Watal committee recommendations for digital Payments in India and accelerate the implementation of the same. The report was brought out to push for a comprehensive overhaul of the regulation of digital payments in India. (Read its list of recommendations here). In June last year, MediaNama also reported about the delay in implementation of the recommendations, and it looks like it will take some more time, if at all. We still have nothing on ensuring interoperability and improving governance at NPCI and addressing the RBI’s lack of neutrality. (Read: Payments Council of India’s wishlist for Budget 2018)

On Data Security

Charlie Lee, True Balance: In lieu of ever burgeoning cybercrimes, the Indian government now more than ever needs to play a larger role in creating secure business and society. This goal can only be achieved through stricter regulations and mechanisms to ensure information protection as well as investments by the government to ensure data security.

On tax benefits

Anand Ramachandran, TechProcess Payment Services: Government must consider a preferential tax rate for small businesses with majority (say 50%) income received through digital channels. This will eliminate the barriers cited by small businesses, expand the tax base, and accelerate the gains of demonetization. Government may also consider tax breaks for fintech companies which are making significant investments in the high volume, low margin digital payments market to provide innovative solutions to merchants and consumers”.

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Charlie Lee, True Balance:  Making the GST data accessible through a secured API to fintech players that lend to the sector, credit bureaus, and legacy BFSI players would help create a more seamless credit process for countless MSMEs in the country. Fintech sector will also benefit from a continued evolution of GST and a much-needed clarity on its implementation.

Ritesh Agarwal, OYO: Challenges in GST’s implementation need to be streamlined. Expecting the concept of declared tariff to be replaced with actual tariff as consideration for GST on hotel accommodation – as is the case with other industries.

Alok Mittal, Indifi Technologies: Secured API access to customer information using GST system and simplification around GST will be an additional benefit.

Sampad Swain, Instamojo: Boost entrepreneurship at grassroots level by exempting online micro businesses from GST which is 90% of all Indian MSMEs. Today, anyone doing less Rs 20lakh gets GST exemption, however micro businesses like sole proprietors doing an online business aren’t. They should be given impetus as this creates millions of direct and indirect jobs.

On corporate tax

Swati Bhargava, CashKaro.com: A cut down in the effective corporate tax rate. Global corporate tax rates have fallen from an average of 27.5% to 23.6% today over the past decade. In India we pay a base rate of 30% as corporate tax which is much higher once coupled with surcharges and cesses. The road map for the next budget should include the reduction of corporate tax rate to something around 18% with withdrawal of tax incentives and exemptions as well as withdrawal of surcharges and cesses.

Ritesh Agarwal, OYO: Expecting a forward-looking budget that comes good on reducing corporate tax rates to 25%, and effects administrative and tax reforms suggested by Easwar Committee – this will go a long way in ease of doing business in the country.

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Kumar Abhishek, ToneTag: Corporate tax to be reduced for start-ups that are driving Make in India by investing in product development and manufacturing. We expect a reduction in Income Tax for individuals working in companies promoting the startup ecosystem.

On re-skilling

Vinay Pradhan, India Skillsoft: To persuade working professionals to undertake self-education programs to upgrade their skillset, the Government should consider making some provision of tax benefits on expenses incurred by them on self-education and also in procurement of simulators, multimedia and e-learning for training providers.

On Media and Entertainment

Subrat Kar, Vidooly: We expect the government will introduce steps that media and entertainment companies can use to protect themselves in cases of copyright infringement. Media companies are capital intensive hence we hope more steps will be taken to reduce the burden on these companies. GST levied on content creators should be reduced.

Written By

Writes about e-commerce, social media, tech and Internet ecosystem.

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



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