Budget 2016: Why start-ups want govt to focus on core issues instead of mere announcements

It is not long since Prime Minister Narendra Modi unveiled his grand plan to unleash the animal spirits among young entrepreneurs in the country. The package, coined as Start Up India Stand Up India, promised a 19-point action plan offering incentives that Indian entrepreneurs never witnessed in the past. From income tax exemption to start-ups for three years, registration through app, self-certification scheme to a Start-Up India hub, a slew of measures were offered to encourage starting up in India, besides launching a Rs 10,000 crore fund.

The government’s initiatives for start-ups notwithstanding, India’s young and established entrepreneurs that Firstpost spoke with had a different point to make. They made a strong pitch for the 2016 budget to address the fundamental issues that creates roadblocks to start-ups, beyond the sops announced in the Start Up India Plan.

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Even when PM Modi launched the plan, some initiatives were questioned like the announcement of a Rs 10,000 crore fund. The question here arises is who would oversee the disbursal of the funds? Or the ambitious tax exemption of three years as announced in the plan. Start-ups do not make profits in initial 4-5 years. So the three years tax exemption is not of much use to the start-ups.

“Most of the startups do not start making profits for initial few years so income tax exemption might not help them as much as would be exemption or deferred timeline for various compliances,” said mobile e-commerce platform, StoreHippo.com Founder, Rajiv Kumar.

Taxes of various kinds were a pain point that most start-ups hoped the government would smoothen for the sector to facilitate its growth. The taxes that becoming thorns on the progress of the start-up sector are service tax, angel tax, etc.  Debadutta Upadhyaya, Co-Founder, Timesaverz.com – a platform to obtain people for home services, termed ST a ‘bane’ currently for all start ups”, especially the ones in a controlled marketplace model.  “I hope the government is able to provide a solution for this,” hoped Upadhyaya.

The Internet and Mobile Association of India (IAMAI), which represents internet and mobile content providers, wants a deferred ST model for start-ups. In a statement, IAMAI wanted a waiver on ST for the first three years and incentives to be given to start-ups if they paid taxes on time.

Another plea from start-ups is to do away with angel tax. When a start-up raises money from angel investors, it has to pay 33 percent of it as angel tax. If the government wants more people to make high-risk investment in early stage companies, an investor friendly tax regime is imperative. Remove angel tax and provide other tax incentives to promote angel investing as a viable alternative investment, suggests Paula Mariwala, Managing Director, Seedfund; president, Stanford Angels & Entrepreneurs India.

One of the reasons for the flight of many start-ups outside India, particularly to Singapore is because of lower taxes and tough compliance rules in India.

Rural India lags

Even though urban entrepreneurs are getting access to central schemes announced by the government, those in far flung areas of the country, who dream of entrepreneurship, are finding it difficult to set out on their entreprenurial journey on account of weak internet connectivity or none in some parts of the country.

The government should bring about regulations that ensure the optimal utilization of the Universal Service Obligation (USO) Fund, says Bhavin Turakhia, CEO and Co-Founder, Directi – a group of tech businesses. This should be to overcome the infrastructure barrier and to enhance the reach of broadband connectivity in rural/ upcountry locations so that the common public can reap the benefits of connectivity and digital tools, says Turakhia.

Initiatives for rural entrepreneurship: Last year, the Ministry of Micro, Small and Medium Enterprises (MSME) announced a program to create tens of thousands of new entrepreneurs in rural areas. Focus is needed on action plans for skill development and upliftment of rural India, says Anjani Kumar, Founder and CEO, Successwrks – HR services. This should be the government's prerogative to effectively increase employment rate and in due course the GDP, adds Dinesh Goel,Co-Founder & CEO, AasaanJobs - online market place for entry level and grey collar job-seekers, seeks initiatives that encourage rural entrepreneurship, skill development and vocational training.

Increased allocation for healthcare: Special incentives for sectors such as healthcare, agriculture will be instrumental in providing more opportunities, say start-up founders. The budget should provide an increased allocation for healthcare towards a direction of 2.5 – 3 percent of GDP over the short term beginning with a 2 percent provision in 2016,  suggests Vishal Bali, Medwell Ventures. The allocation of Rs 33,150 crore in the last fiscal for healthcare was a decline from the previous year. “For a sector which is the fifth largest employer in the country there is a significant opportunity to give it a much needed fillip by supporting its infrastructure expansion and expanding the base of medical education in the country,” said Bali.

Imports account for about 80 percent of total medical devices, which include advanced machines. A month ago, the government raised import duty on medical devices used for surgical, dental and veterinary use from 5 percent to 7.5 percent. This was done to encourage companies in India to manufacture these products and thus help the Make in India program. “The import duty hike to 7.5 percent will not only burden patients but also negatively impact the healthcare industry in country, says Hisao Masuda, Managing Director, Omron Healthcare India. “The government must improve regulatory and product registration process, to make the process hassle free, short and more transparent,” says Masuda.

Investment in infrastructure: The Make in India campaign to encourage increase in manufacturing in India and attract overseas companies to set up operations in India needs a support system and an enabling environment. To do that, says  Umesh Revankar, Managing Director and CEO, Shriram Transport Finance Ltd., “India needs faster and efficient connectivity between ports, railways to the site /plants that would reduce logistics cost which is probably one of the highest in the world for movement of goods.”

This would require capital investment to upgrade existing infrastructure such as roads and highways. “This will be a big win for the surface transport sector,” said Sakshi Vij, Founder & CEO, Myles – self-drive car sharing firm.