Bud­get 2017 Is the Bud­get ‘fu­tur­is­tic’ ?

Voice&Data - - COVER STORY -

Does Bud­get 2017 of­fer a sound foot­ing for startup ven­tures? Here are some quick bytes from es­tab­lished and bud­ding startup en­trepreneurs on the Bud­get im­pact. In the bud­get pre­sen­ta­tion, Union Fi­nance Min­is­ter Arun Jait­ley said that the in­come tax for small com­pa­nies with an­nual turnover of upto Rs 50 crore is re­duced from ex­ist­ing 30% to 25% in or­der to make MSME com­pa­nies more vi­able and also to en­cour­age firms to mi­grate to com­pany for­mat. This is con­sid­ered as a wel­come move at a time when In­dia is still un­der the ef­fect of de­mon­e­ti­za­tion.

“There was an ex­pec­ta­tion of an ‘across-the-board re­duc­tion in the rate’. In­stead, a cal­i­brated ap­proach has been adopted and the re­duc­tion is only for com­pa­nies with turnover of less than Rs 50 crore. I ex­pect that there will be some safe­guards against un­nec­es­sary ar­bi­trage op­por­tu­ni­ties by split­ting busi­nesses,” says

Ab­hishek Goenka, Part­ner Di­rect Tax at PwC In­dia.

Goenka gives a thumbs-up to the in­creased pe­riod for profit-linked de­duc­tion for 3 years out of 7 years, as start-ups are not ex­pected to make prof­its for the first few years. “What the in­dus­try wanted was a 10-year pe­riod, but ex­ten­sion to 7 years from what was pre­vi­ously 5 years is nev­er­the­less wel­come. The ex­emp­tion from MAT (Min­i­mum Al­ter­nate Tax) has how­ever, not been al­lowed, and an en­hanced carry over pe­riod will not re­ally help star­tups from a cash flow per­spec­tive. The pro­posal to al­low star­tups to carry for­ward losses in spite of change in 51% of share­hold­ing pro­vided orig­i­nal pro­moter share­hold­ing con­tin­ues is a big re­lief and a wel­come move,” he says.

As per data of As­sess­ment Year 201516, there are 6.94 lakh com­pa­nies fil­ing re­turns of which 6.67 lakh com­pa­nies fall in this cate­gory and, there­fore, per­cent­age­wise 96% of com­pa­nies will get this ben­e­fit of lower tax­a­tion. Ac­cord­ing to the Min­is­ter Jait­ley, this will make In­dia’s MSME sec­tor more com­pet­i­tive as com­pared to large com­pa­nies. The rev­enue-fore­gone es­ti­mate for this mea­sure is ex­pected to be Rs 7,200 crore per an­num.

Jait­ley also stated that it is not prac­ti­cal to re­move or re­duce MAT at present. How­ever, in or­der to al­low com­pa­nies to use MAT credit in fu­ture years, he pro­posed to al­low carry for­ward of MAT upto a pe­riod of 15 years in­stead of 10 years at present. MAT is presently levied as an ad­vance tax. Al­though the plan for phas­ing-out of ex­emp­tions will kick in from April 1, .2017, the full ben­e­fit of rev­enue out of phase-out will be avail­able to the Govern­ment only af­ter 7 to 10 years when all those who are al­ready avail­ing ex­emp­tions at present com­plete their el­i­gi­ble pe­riod.

For the star­tups, Jait­ley has pro­posed in­come tax ex­emp­tions. The profit-linked de­duc­tion avail­able to the star­tups for 3 years out of 5 years has been changed to 3 years out of 7 years.

Sandeep Ag­gar­wal, Founder, Shop­Clues and Droom,

clas­si­fies the Bud­get as a pro­gres­sive econ­omy bud­get. “The govern­ment has men­tioned ev­ery­thing right from re­duc­ing fis­cal deficit gap to cleaner GDP growth, ex­pan­sion­ary na­ture of mon­e­tary poli­cies to re­duc­ing the tax for in­come bracket of Rs 5 lakh. Profit linked-de­duc­tions for start-ups get­ting re­duced to 3 years, out of 7 years is a big re­lief for the startup ecosys­tem. Un­til, last year govern­ment had given three-year tax hol­i­day and MAT, which was go­ing to ex­pire by 2019 and now this has been ex­tended to 7 years. How­ever, there are many things I was hop­ing 2017 Union Bud­get to touch upon, for ex­am­ple, poli­cies to en­sure that cap­i­tal is eas­ily ac­ces­si­ble to en­trepreneurs, repa­tri­a­tion of money com­ing to In­dia, R&D credit, no cap­i­tal gain for any kind of start-up sale or exit and to make for­eign list­ing for any In­dian com­pany straight­for­ward. Those re­main miss­ing still.”

Dr Apoorv Ran­jan Sharma, Co-Founder, Ven­ture Cat­a­lysts,

agrees. Ac­cord­ing to Sharma, it is in­deed a pro­gres­sive econ­omy bud­get. “The de­duc­tion in cor­po­rate tax is a great boost for the com­pa­nies with turnover of 50 crore or less. Be­sides, SMEs with turnover up to Rs 2 crore, will en­joy tax re­lax­ation from 8% to now 6% tax rate. The move is go­ing to waive off the fi­nan­cial bur­den, while pro­pel­ling small mer­chants on their path to suc­cess,” he says.

Young en­trepreneur

Sak­shi Vij, Founder & CEO, Mylescars.com,

says, “The govern­ment’s fo­cus on in­clu­sion and en­cour­age­ment of the MSME sec­tor along with star­tups is vis­i­ble. The in­crease in the profit linked de­duc­tions pe­riod to 3 out of 7 years is a wel­come change for young star­tups like us. The ex­emp­tions pro­posed for the In­dian en­ti­ties with For­eign placed port­fo­lio in­vest­ments is also a step in the right di­rec­tion.”

How­ever, as star­tups and MSME sec­tor in gen­eral is ex­pected to, and will, gen­er­ate a sig­nif­i­cant por­tion of em­ploy­ment and in­no­va­tion, par­tic­u­larly re­quired in this en­vi­ron­ment of global eco­nomic slow­down, there was def­i­nitely a lot more this bud­get could have done for this sec­tor. “It was dis­ap­point­ing that star­tups did not re­ceive more promi­nence be­yond the 5% re­duc­tion in cor­po­rate tax,” opines

Gopikr­ishna Lin­gala, co-Founder LeanSpoon,

who be­lieves that Jait­ley could have of­fered more to star­tups. Ac­cord­ing to

a Gur­gaon-based Ar­ti­fi­cial In­tel­li­gence Startup, the Union Bud­get 2017 does not pro­vide any di­rect ben­e­fits to star­tups this year. Be­sides, the tax ex­emp­tions from cap­i­tal gain are rather dif­fi­cult to meet, at least in the early stage of 3-5 years for a startup. How­ever, the newly an­nounced ex­emp­tions for in­come tax for in­di­vid­u­als and well-rounded push to­wards dig­i­tal pay­ments will ul­ti­mately in­crease the buy­ing ca­pac­ity, along with mo­bile phone util­ity. “Th­ese in­sti­tu­tional changes, I be­lieve, will push to­wards the growth of new age dig­i­tal star­tups, al­beit in­di­rectly,” says Rai.

Founder, Staqu, Atul Rai, CEO and co-

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.