Budget 2020: Start-ups hope for faster policy execution, friendly tax environment

Many start-ups are still concerned that the GST has hampered the cash flow of SMBs

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The start-up fraternity had seen a few promising steps with the removal of Angel Tax, MSME loans of Rs One Crore and Mudra loans etc. The start-ups also feel that the Indian economy is also looking at a consumption booster to revive itself and the start-up sector. Many feel that the key problems persisting in the different policies is their execution. Many start-ups are still concerned that the GST has hampered the cash flow of SMBs thereby affecting their buying power. Some also feel that there should be more income tax holiday for start-ups and it should apply for all start-up companies registered from April 2015. There is also a mix bag of expectations from start-ups with some expecting more technology inclusions.

“Most of the time MSME site for loan approval is down as even with approval some start-ups have had problems to secure this loan. Every year we see allocation of large amount of money for start-ups; from the last allocation of Rs 10,000 crores, we had only seen 30 percent allocated or deployed funds that is too less compared to the allotted funds. There is still no accountability on whether this money has actually gone to start-ups or is with fund management companies like SIDBI. We need a more informative website and team to manage this,” remarked Anil Kumar Prasanna, CEO, AxisRooms. 

Many start-ups are also optimistic that the Union budget will renew the focus on them and the fiscal impetus they need. “The last budget missed the mark when it came to major inclusions for the technology start-up sector. We are optimistically looking forward to a course correction this year. As India is becoming a hub for home grown start-ups, it would be great if the government can take this up as a priority area in this budget and allocate more funds and announce policies that would encourage the start-up sector. This will help create a more welcoming ecosystem for the industry players and catalyze innovation,” said Swathi Bavanaka, Co-founder and COO, Evibe.in.

Some other start-up entrepreneurs also vouch for more effective execution of policies towards start-ups. “Startup India has been a good initiative. However, the government can bring more execution in the policy framework and relax it to cover slightly more mature start-ups. This will help to build a lot of new companies and jobs. The government can bring policies for both early stage and mature start-ups as both are important for the economy. Besides this, the economic mood in the country can improve with some forward looking and consumer friendly policies and initiatives. Instead of having policies that only benefit a few large companies, we need to have an inclusive mindset that can benefit micro-entrepreneurs, SMEs and shops. Additionally the government should encourage SME, shops and bootstrapped companies with tax-free policies etc so that they can compete against the heavily funded, powerful companies. This will help in the distribution of wealth across segments instead of a winner takes all kinds of market. Fair pricing from online players should be governed to protect small entrepreneurs,” observed Manoj Agarwal, Co-founder and Chief Product Officer, Xoxoday, a rewards and incentives technology platform. 

Some start-ups also feel that there should be more reforms around GST for the start-ups to help them grow. “Under GST, the extra GST inputs should be credited back to the start-ups (like for us, when we buy furniture, we have to pay GST on it. Now when we rent it, the GST on the rent is adjusted against the already paid GST during purchase. But even then, the GST on purchase is much higher compared to what we adjust on rent, so we want that extra GST to be credited back to us,” pointed out Sidhant Lamba, founder of Fabrento, an online furniture rental startup. 

Many start ups are also vouching for a consumption booster that will up and boost their business as well. “The Indian economy needs an urgent dose of consumption booster; thus it would be wonderful to have provisions in the budget which could assist in an instant rise in consumer expenditures. Relaxation on personal income tax rates could be one such move that can act as a booster shot. At the same time we expect the budget to bring in provisions for lesser and reduced compliance for smaller companies; which as of today have to follow almost similar compliance that of a larger corporation,” Siddharth Jain, Co- founder of Vaahika a freight logistics start up told THE WEEK. 

He feels that the budget should come up with revolutionary steps to overhaul the complete compliance and fillings guidelines for smaller companies and startups and do away with the current penal provisions. “The current economic slowdown could be linked with the rapidly declining health of MSMEs in India; especially the ones in the manufacturing sector. Though the government has already reduced the applicable income tax for this segment, it appears that it has not been helpful in bringing the required turnaround. More needs to be done to address the concerns of liquidity crunch, ever increasing compliance and reducing competence for the overseas markets. It has had a worse impact on the logistics sector, especially on the small and medium sized fleet owners. On one side it is the demand which is declining and on the other side increased operating expenditures have made it very difficult for them to even pay the EMI's regularly thereby increasing defaults,” added Jain.