Finance Minister Mr. Arun Jaitley is all buckled up to present the Union Budget 2018 of India for the fiscal year 2018-19 on February 1. This is going to be the last full-fledged budget presented by the Modi Government before the 2019 General Elections.
Looking at the current landscape of the startup industry, we present to our readers a pre-budget series providing a comprehensive analysis of the general state of affairs of key sectors in India including agriculture, eCommerce, logistics, health, education and real estate from the lens of the startup ecosystem. This series also comes with the expectations of different stakeholders in the Indian startup landscape from the upcoming budget 2018.
LET US FIRST LOOK AT WHAT BUDGET 2017 BROUGHT TO THE TABLE LAST YEAR
- The financial budget for 2017, in order to make the process of setting up startups and survival in the Indian business market conducive, allowed startup companies to pay tax only for three years out of a seven-year period if only they make profits. The move of providing income tax holiday to startups was meant to promote startup ecosystem in India
- The budget, while giving much relief to the MSME sector, announced the reduction in the tax rate from 30% to 25% for the companies with an annual turnover of less than $7.83 Mn (INR 50 Cr)
- The budget also provided a tax cushion to small businesses and startups with a turnover of up to $313K (INR 2 Cr), by reducing the presumptive tax rate to 6% of the total turnover
- Though refusing to bulge for the demand for the abolition of Minimum Alternate Tax (MAT), the finance minister allowed companies to carry forward their MAT for a period of 15 years from the present period of five years
This Budget is also expected to promote digital transactions proactively in order to make India a cashless economy. A policy thrust is required to increase digital footprint in the country by capping cash transactions and by financially incentivising digital ones.
Though there were certain issues and queries raised by the Indian Startup Ecosystem which received a muted response from the Budget such as the Angel Investor Tax, total abolition of Minimum Alternate Tax (MAT), etc.
FRESH HOPES OF THE INDIAN STARTUP ECOSYSTEM FROM THE BUDGET 2018
The experts have showcased confidence in the tax simplification and rationalisation drive. It has been hypothesized that there will be an increase in the tax exemption limit under the 80C section from $2,352 to $3,136 (INR 1.5 Lakh to 2 Lakh). A reduction in the corporate tax has been proposed by the corporate sector and has been keenly acknowledged by the finance minister, Mr. Arun Jaitley.
One major concern of Indian Entrepreneurship community is tax terrorism which is prominently used by the income tax officials for imposing disproportionate amounts of tax penalties in form of angel tax. The startup industry is looking forward for this concern to be resolved in the Budget 2018.
Agriculture and Welfare
Budget 2018 is expected to bridge the gap between agriculture and technology. This can be achieved effectively with the birth of agritech startups – optimising forecasting, recognising crop diseases at the earliest by infusing IOT and AI, channelizing the farm-to-fork way and more. The stakeholders of the startup ecosystem expects the government to either take some initiative or stop interfering and let startups take the lead.
This sector is hoping for higher fiscal allocation from the Budget 2018 as in the past they have been stagnated at below one percent GDP levels. Healthtech startup community, just like the agritech, is expecting greater spending on healthcare infrastructure facilities, increase in the number of healthcare specialists, reduction of GST on drugs, focus on e-pharmacy sector, greater use of medical devices in diagnostic and treatment and a larger space for technology inclusion and innovation.
Due to increasing penetration of internet and convenience provided to the customers, there has been a continuous and substantial growth of ecommerce industry in India. Initiatives taken in 2017 budget like reduction of tax rate by 5%, were welcomed by the ecommerce startups. The advent of Digital India campaign and liberalisation of Foreign Direct Investment (FDI) norms in ecommerce helped the sector in becoming much more organised and gain popularity.
Now the industry further expects rationalisation of the tax structure in order to increase the purchasing power of the general population, continuous liberalisation in FDI, further push to ‘Digital India’ campaign and much more financial/non-financial initiatives for transacting digital from the upcoming Union Budget.
In a nutshell, everything presented above presents the broader view of the Indian Startup Ecosystem’s expectations from the Union Budget 2018.
Now the major question that lies in front of us is, whether these expectations will be translated into reality or just remain a matter of conjuncture.
As rightly said by Jon Snow, “When people make false promises, words stop meaning anything. Then there are no more answers, only better and better lies”.
So let us wait for the right day and the right time for all the lies to be revealed and the truths to be embraced.