Budget 2019 India: As the new government is getting ready to announce its agenda and policies, I think it’s appropriate time to think aloud about what entrepreneurs are expecting in the near term and India Budget 2019.
By Robin Alex Panicker
Budget 2019: India has voted for continuity. NDA 3.0 lead by Prime Minister Narendra Modi is expected to increase the pace of reforms, thanks to the huge mandate. Also, Indian entrepreneurs are ambitious as never before and they have huge expectations from the government in terms of building a conducive environment for early stage ventures.
As the new government is getting ready to announce its agenda and policies, I think it’s appropriate time to think aloud about what entrepreneurs are expecting in the near term and India Budget 2019.
- Angel Tax – Angel Tax is that tax a startup has to pay on the investment it received, if IT department disagrees with the valuation and considers the difference as taxable income. It’s a weird situation where capital is considered as income. Government has relaxed some norms related to Angel Tax. But still it puts restrictions on individual investors to fund an early stage startup. It’s almost impossible to raise funds from friends and family unless they pass the defined criteria on annual income and such. Hope to see a remedy in Budget 2019.
- GST modifications – Taxing at 18% GST has increased the cost of acquiring digital and technology solutions. If the upcoming budget can reduce the tax slab for technology products and services to 12%-15%, it will boost the early adopter market for startups. Also GST and input credit mechanism need to be modified in such a way that they do not end up blocking the much needed working capital. The central government can look at this in the upcoming Union Budget
- Data Protection Law – Government is planning a data protection law. While privacy is of utmost importance for any government and rightly so, the law should not prevent startups from providing useful solutions to customers and should not be restrictive in nature. I hope government consults representatives from startup communities before the final law is drafted.
- Removing restrictions on running subscription based services – It’s almost impossible to run subscription based services for Indian startups. Automated subscription payment doesn’t work as the OTP based high security mechanism for online card payments introduces manual intervention for monthly payments. This breaks the seamless experience that global customers are accustomed to, putting Indian startups targeting global market in a disadvantageous position when compared to their counterparts in rest of the world.
- Fund of Funds – One of the major initiatives by NDA 2.0 was setting up a fund of funds through SIDBI. The initiative need to be taken forward to next level as this is contributing much in improving the funding scenario in the country.
- Hardware Startup Policy – Thanks to initiatives like smart cities, Swach Bharat, Make In India, India is becoming an attractive location for hardware startups. But we need to come up with a comprehensive hardware startup policy if we have to take the ecosystem to next level. Unlike software startups, hardware startups have a longer gestation period and the cost of mistakes are many times higher. So we need a separate support policy for them. We can expect something pertaining to this in Budget 2019.
- Incentivising private entities to buy from startups – For any startup ecosystem to thrive, having an early adopter market is very important. Central Government and many state governments have already come up with policies to ensure startups can participate competitively in government procurement. We need to extend the concept to private sector. Unlike government, private sector will not take part in such an initiatives unless they see a benefit for themselves. I propose a scheme where if a private entity is buying from a startup, they get added benefits through GST input credit mechanism. That will a good enough incentive for them to prefer buying from startups.
I hope the above points will be widely discussed and the discussions will result in positive outcomes for the entrepreneurial ecosystem in India. Let’s all join together to build the New India.
(Robin Alex Panicker is a technology entrepreneur and a keen observer of the startup ecosystem. He works closely with the entrepreneurial ecosystem in Kerala. Views expressed are author’s own.)