Budget 2022: Waive TDS, GST for Business Correspondents for frictionless banking services

Union Budget 2022-23: The Budget should strongly consider reducing the compliance burden for MSMEs in all aspects, be it taxes, loans, audits, or licensing

Anand Bajaj January 26, 2022 18:37:16 IST
Budget 2022: Waive TDS, GST for Business Correspondents for frictionless banking services

Indian Union Budget 2022: The pandemic has led to an epic distruption

The Indian government's digital drive has paved the way towards financial inclusion and the greatest fintech revolution in history. Additionally, the pandemic has led to an acute disruption causing digital adoption to take a quantum leap across both organisational and industrial levels, accelerating digital transformation by months or even years. Currently, we are at an inflection point, and therefore, Budget 2022 must prioritise the development of a robust digital infrastructure while adopting a clear, consistent, and policy-driven approach towards strengthening the fintech ecosystem in the country.

Liquidity aid to MSMEs

MSMEs contributing to more than 30 percent of the country’s GDP, form a crucial part of the Indian economy. The MSMEs which were caught off-guard amid the severity of the pandemic was the worst hit. The Budget should, therefore, focus on reviving this segment and getting them back on track. One of the most pressing issues plaguing MSMEs is the ongoing shortfall of credit and finance which has been exacerbated by the pandemic.

Emergency Credit Line Guarantee Scheme (ECLGS), the government’s flagship credit scheme that is set to end by March this year, should be extended at least by another year. Besides, the scheme should strategically render special focus on a specific sector within the MSME ecosystem. Additionally, the upcoming Budget should also consider modifications to the scheme such that the eligibility criteria are extended to offer credit support to newer segments.

Further, the Budget should strongly consider reducing the compliance burden for MSMEs in all aspects, be it taxes, loans, audits, or licensing. This will aid in the penetration of digital transactions, rapid license approvals, and clearances for fintech businesses in general. We are confident that Budget 2022 will uphold its commitment to help MSMEs and last-mile NBFCs gain access to institutional financing.

Grants for technology and innovation

The pandemic has witnessed a significant surge in digital payments, necessitating a speedy digital transition via building a robust infrastructure. Backed by technology and innovative solutions, fintech has empowered many vulnerable medium and small businesses to not just sustain but resiliently thrive to build new growth areas.

UPI was a game-changing breakthrough, and we must be able to replicate its performance with newer, and more inventive technologies. Considering India is varied, it is critical the Budget should incentivize fintech and tech-led startups to invest more in R&D to launch new products, tap new customer groups while growing into new geographies. The sector expects benefits from the government for ‌companies that invest in strengthening technologies around new tech-enabled platforms, AI, ML, and IoT.

Reduction in TDS for BC outlets

Business Correspondent (BC) play a very crucial role in driving financial inclusion at the ground level. To ensure the same benefits reach the less-savvy citizens, the government could waive GST and TDS for financial inclusion services at BC outlets across India. A GST and TDS waiver will help reduce the cost of offering seamless financial services and help high-end tech reach the technology-oblivious segment. We stand with the government's intent of taking digitization to the last mile and passing GST waiver benefit to the end-users as this will push for greater financial inclusion and a digital economy in the country.

Moreover, the low-income citizens are mostly catered to by low-earning retailers who barely cross the value of taxable income, and hence, do not file IT returns to claim a refund of TDS. Thus, TDS is only a cost to them and not a refundable deduction because they do not know how to take a refund by filing returns. We sincerely hope that TDS for income below Rs 50,000 a year can be waived off. We are positive that this Budget will consider the grim working condition of the BC network and make the needful regulatory changes to ensure the viability of a community that has been vital in driving the cause financial inclusion and democratization of digital payments in the country.

Tax reductions for startups promoting digital awareness

Considering the economy is gradually gaining ground, stimulus packages and conducive policies to push ease of business among startups will go a long way in reviving economic activity, across the country. Additionally, many startups often self-fund educational endeavours to drive awareness and enlighten people about their offerings. It includes numerous innovative solutions that may benefit them in their everyday lives. Such initiatives should be incentivised such that startups are encouraged to do more. Besides offering tax breaks, the Budget should also consider offering credit and financial assistance to fintech start-ups investing in R&D, product trials, and eyeing to expand into new growth markets.

Simplification of KYC norms

The simplification of KYC standards is essential. Startups have long expressed a desire to eliminate the need for multiple KYCs for numerous banking services. With financial inclusion at the forefront of the agenda, digitizing and simplifying standards is essential to connect individuals across geographies by offering last-mile connectivity.

The writer is Founder, MD & CEO, PayNearby. Views are personal.

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