New Delhi: Prime Minister Narendra Modi has been a strong supporter of India’s growing startup ecosystem. In 2016, the Startup India initiative was launched by the Prime Minister to build a strong startup culture in the country. And in the last five years, startups in India have gone from less than 500 to over 60,000, government data shows.
As the sector now grapples with the impact of the Covid-19 pandemic on the economy, all eyes are on Finance Minister Nirmala Sitharaman, who will present the Union Budget 2022-2023 in Parliament on February 1.
Startup-friendly policies as well as highly anticipated tax exemptions from the budget can enable companies to spend on innovation, increase ease of doing business and reduce compliance costs. Subsidies are another factor that a lot of companies will be hoping for, especially in the electronic vehicle sector.
The companies are also hoping that the government will expand on Startup and Made in India initiatives to help domestic brands grow and thrive in the Indian market.
We spoke to several leaders of startup companies who had different expectations from the Union Budget. Here’s a look.
Extension of FAME Subsidy Fund
Dr. Akshay Singhal, Founder, Log9 Materials said, “In the upcoming Union Budget, from the EV ecosystem perspective, we expect to see that the FAME subsidy fund should be extended to EV retro fitment kits. Additionally, more R The &D incentive should be given for R&D investments made in India for development related to energy storage and EV technology as well as in local technology development, which should be made 100% adjustable against corporate taxes.
Financing Options for EV Commercial Vehicle Buyers
“At a time when EV adoption is gaining unprecedented momentum despite several challenges, in the upcoming Union Budget 2022, we at Atrio address the critical area of making available a wide and diverse range of financing options for EVs to the Finance Minister. Would like to see buyers of commercial vehicles – as this is of utmost importance for the growth of EVs in India, going forward,” said Deepak MV, CEO and Co-Founder, Atrio.
For this, he said, the government should make the EV sector the primary lending sector for financial institutions. “Furthermore, reducing GST taxation on lithium-ion batteries and EV spare parts and components can also be a big step from the point of view of EV manufacturing and OEMs. Given that the adoption of EVs in the logistics and last-mile delivery segment is the need of the hour to reduce carbon emissions, the government may provide additional leeway for the country’s fleet aggregators to completely switch from IC engines to EVs. Should come with encouragement. To pave the way for a sustainable and zero-emissions future. Last but not least, we also expect that this budget responds to the need to revive B2B retrofitment (ICE to EV conversion) across India by bringing retrofitment under the ambit of FAME-II.
The textile and fashion industry needs urgent reforms
Abhishek Pathak, Founder & CEO, Greenwear: “I expect the budget to include a 5-year plan to increase the participation/use of renewable energy resources by the decentralized small scale industries and craft sector. Government to ensure increased procurement from start-ups Must work with renewable energy resources. The textile industry alone has the potential to reduce its carbon footprint by a huge margin while also creating jobs locally. The textile and fashion industry must urgently work to reduce the polluting earth Improvements are needed. We are taking one step at a time and currently very small against the problem. However, we believe that if the solar-textile value chain is integrated with natural fibers and organic processes, the textile industry will have a major impact in reducing carbon footprint. about 50%, and for 1.2 crore people to migrate from their villages. Without it ,
Expand Make in India initiative
Shivam Singhi, CEO and Co-Founder, Avashad, said: “As a startup in the wellness and medical cannabis space, we have benefited from previous government initiatives like the Startup Initiative and the Make in India initiative, which helped us carve a niche for itself. is of. We ourselves However, in 2022 we expect the government to expand these schemes and help domestic brands to grow and flourish in the Indian market. We also expect incentives to help Indian brands expand their markets internationally and bring in FDI into the fast-growing wellness sector. We also expect the government to provide more tax exemptions to startups in the wellness space to help them compete with large multinationals to control the sector.”
Tax holiday extended for startups
Dr. Navneet Gupta, Founder and CEO, YPay, said: “The extension of tax holiday for startups will be a great way for the government to show its commitment towards creating a strong and dynamic startup environment. Investment in infrastructure that fuels digital payments needs to continue rapidly. Let alone the villages, there is a lot of potential in Tier 2 and Tier 3 cities. The pace of investment should increase only when this potential is used meaningfully. For Neobanks and PPI companies like ours, the exclusivity and changes in KYC requirements are indeed a major nuisance. KYC norms lead to many problems like registration issues for the customers. And finally, the government needs to see the fintech industry as a partner in helping formalize the economy and make banking services accessible to those who do not have access to them.”
Policies for the Unorganized Sector
Neha Indoria, Co-Founder, Boeing! (D2C Children’s Furniture Brand): ‘The budget is expected to give a push towards the organized segment of India’s furniture market, especially the children’s furniture market (online and offline). We expect policies that will level the playing field for the largely unorganized sector in India and also help in boosting the export market, which is currently capitalized given the global trend to move away from the Chinese market. can be done.’
ease of doing business
Pankit Desai, co-founder and CEO of Sequretek (Mumbai-based cyber security company), said: “The fundamental issue for startups continues to be ease of doing business and helping mitigate cash flow challenges.”
He suggested some specific areas where some better support is desirable. these:
- Employee stock options specifically surround the taxation effect when the stock is vested (but not exercised) and the provision for founders to receive ESOPs.
- There is no difference in regulatory compliances like RoC, GST, IT, RBI whether you are a startup or a big company. The amount of paperwork needed to run the company remains the same.
- By default for the period when you are a registered startup, one has to be in the low TDS bracket as the cash flow issues are quite serious.
Tax exemption and reduction in GST on money received
Rohan Verma, Co-Founder and CEO, Breathe Well-Being (health-tech, digital therapeutics company focused on type 2 diabetes reversal and management) said: “India is home to over 5000 health-focused startups and innovative health-tech players. Coming to the market is increasing interest from the Indian as well as the international investor community. According to recent data from London & Partners and Dealroom.co, India has secured $1.9 billion in funding from VCs in 2021, making it Total VC investment in the health-tech sector has increased by $4.4 billion since 2016. Today, India ranks fourth globally for VC investment in the health-tech sector, after the US, China and the UK. Since in the healthcare sector Indian tech-driven enterprises are constantly developing and curating solutions to support India’s healthcare infrastructure, considering tax exemptions on funds received by the government and reducing GST to 3% from the current 18% The government should support digital-health startups that are a Investing heavily in infrastructure by easing norms and providing assistance or exemption from certain mandatory compliance requirements.”
Promoting the start-up ecosystem
Vipul Singh, Founder and CEO, Aarav Unmanned Systems (AUS), said, “In this Union Budget, we expect the government to boost the start-up ecosystem in the country and announce steps that will ease funding and Create a conducive environment for doing business. With the COVID 19 pandemic, we have witnessed an accelerated process of digital transformation. We cannot deny that the pandemic has encouraged people and businesses to adopt new ways of doing things and their This has prompted a change in behavior again. The government’s announcement of the Drone Rules 2021 and the PLI scheme for the drone industry has given the industry a push. Many drone companies in India have started large-scale, commercial trade-offs in 2022. -Business (B2B) has signed new deals to start drone operations. With this budget, we expect the government to simplify policies, create a strong credit system for MSMEs and provide better Working capital support that allows drone companies to scale up production and produce incentives ( PLI) will help in availing the scheme. We will also see employment opportunities which we believe are critical to the demand revival in the post-Covid era. ,
PLI Schemes for Robotics Sector
Satish Shukla, Co-Founder & Head – HR & Marketing, Adverb Technologies on ‘Budget Expectations for Technology and Start-up Sector’: “During Covid-19, it became very clear that the entire base of the global supply chain won “India will need its own manufacturing base to avoid working in the covid era and to avoid disruptions. Subsequently, the government has taken important steps in this direction by introducing PLI schemes, these PLI schemes should also be extended to the robotics sector as it will encourage global players for Make-in-India and also boost Indian robotics companies. give. Currently many Indian companies are importing robots from outside, especially China and robotics as a sector is poised for growth globally.”
Framework for regulating the use of cryptocurrencies
Amit Navka, Partner – Deals and India Startup Leader, PwC India, has these suggestions:
Create funding plans specifically designed to support the startup ecosystem – for example, supporting digital lending startups that have faced stress during the pandemic.
Provide directional clarity on the framework for regulating the use of cryptocurrencies and crypto startups.
A significant portion of employee compensation in startups is through ESOPs. Shifting the chargeability of tax till the date of sale of shares, i.e., when the employees finally realize the cash consideration, would be beneficial to the employees.
Allow greater access to capital and provide more clarity on regulations allowing overseas listing of Indian companies, including relevant amendments to income tax sections.
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