Mr Arun Jaitley, here’s what the startup industry is expecting from Budget 2016

In a season of great initiatives, discussion, debates kick-started by the Modi government on the startup community, both the venture capital community as well as the entrepreneur club in India have pinned hopes on Mr Arun Jaitley’s Union Budget scheduled to be announced this February end. The recent Startup India, Standup India event has further risen hopes among the community of a similarly encouraging Budget too.

It is a fact that there needs to be a robust evaluation of prior period performance coupled with a reasonably realistic short- and long-term forecast, for a government to be able to bring out a thought through Budget.

Before the D-Day approaches, we spoke to a couple of start-ups in different sectors to understand their hardships and learn their expectations from Mr Arun Jaitley’s Budget this year. Here’s what they are:

Ankur Saigal, Chief Business Officer, Funtoot

Q) What are the hardships in terms of stringent or restrictive govt policy they face in their respective sectors as of now?

There is no differentiation between software product and software service; therefore there is lack of clarity over applicable service tax and VAT on sales of software product. At the same time it is a little unfair to apply same service tax and VAT rates (if at all applicable) to educational software products.

There is a lack of focus on learning outcome in education sector. Focus is entirely over inputs (infrastructure, teachers, etc.) rather than the results being produced, especially in primary and middle education, which in turn doesn’t create conducive environment for innovative solutions.

Q) What are their expectations from the govt’s ‘upcoming budget’ to do away with these problems?

Government should clearly distinct between software service and product and define appropriate tax rates for both of them. Government should also set up lower rates (if any) for educational software products to promote innovations in the field. This will go long way in addressing the lack of quality education in India.

New education policies should start measuring learning outcomes at each grade level and budget allocation for schools and districts should be based on the demonstrated results.

Suman Howlader, CEO & Founder of CarZippi (Bangalore based start-up in car care segment)

Hardships: As of now, if we raise any invoice which attracts Service Tax, we need to deposit the service tax amount with Govt of India as per invoice amount. However, at times, you end up having bad debts on few invoices as startups may not have a robust and well defined collection system in place. Primary focus during the initial days is to get a foothold in the market and most of the efforts are directed towards it. So, if Govt makes necessary changes to the rule and makes it necessary to deposit the ST only post collection, it will take away lot of hassle and stress factor from the startups.

Expectations: Most of the startups run on bootstrap funding resulting in a stressed budget hiring to onboard an skilled employee. So, if there is any relief in terms of flexibility to decide on the contributing amounts in the areas of provident fund and ESI both for employees and employers and if organizations/candidates are allowed to choose ESI vs other health plans, it will be a boon for the startups as they can choose options based on budget and available funds.

Lokesh Bevara CEO & Co-founder of 360Ride

Hardships: Keeping the positives of "Startup action plan" event into consideration I strongly feel government should allocate a decent amount of budget for startups. The fund which will be allocated should vary from startup to startup based on the stage in which they are in.
Early stage startups need more support with fund.The funds which are allocated should reach startups on time and the process should be clear and transparent with out having any hurdles.

Expectations: In ride sharing industry rules should be revised in such a way that sharing a seat even in commercial format should be allowed.Any rule has can become an old rule if it is not helping any startups/enterprises in solving the real world problem.

Sudarshan Purohit, Co-Founder of Zenify.in

Hardships: ROC (Registering of a company) is a lengthy process which consumes 50 % of our time to understand and signing the documents.

FIPB (foreign investment promotion board) drafts the FDI policies but we are not able to approach FIPB with grievances. Whenever we approach them with grievances, they are re- directing us to the government stating that it does not have an adequate data to answer for grievances which really slows down the process and creates confusion. Moreover FIPB does not have a physical centre in other cities except the NCR region which creates a gap between the start-ups and FIPB.

Expectations: During the budgeting, we expect the allotment of special funds for the start-ups and “CREDIT SECURITY BOND” from the government which can be a security to receive an initial loan from the Banks

Draft liberal FDI policies in order to reduce FDI gap for the start-ups; 100 % tax holidays on direct (Corporate, MAT), indirect tax, surcharge tax for first 3 years; Government needs to define and categorize the start-ups based on which all provision and taxes needs to be re- structured.

Akhil Gupta, Co-founder of Bumper

Hardships: Incentivising and giving tax breaks to early stage startups will pave way for a new breed of fearless entrepreneurs. Angel investors should be incentivised and given a tax benefit. By providing a waiver on service tax for 3 years can help a startup in their capital requirements. The 2016 budget will be the one keenly followed by the startup community and we can only hope it ushers in a new era of entrepreneurship.

Expectations: Government should ease the qualification of Angel money, often the lifeline for entrepreneurs. Tax breaks and incentivization to individual investors will be a welcome move. Waiving off service tax for a period of 3 years will give a huge relief to Bootstrapping startups. Scrapping unnecessary paperwork and a fast track documentation process will help save precious time of an entrepreneur, allowing him to expend his energies on the right things.

Mukesh Singh, Founder & CEO, ZopNow

Hardships: The typical hardships faced by startups like ours are mostly around tax regulations - which get too intricate at times. We have been eagerly waiting for a uniform tax structure that GST was expected to bring in. The delay there has definitely pushed back lot of investment that India could have otherwise gained from - considering the prevailing slowdown that the world economy is going through.

Expectations:

- Simplification of tax laws for startups operating in e-commerce
- Tax Incentives for employees working in small scale enterprises - including startups
- Policy framework on supporting startups trying to list themselves with an IPO

(image credit: reuters)