It’s that time of the year, and the markets are abuzz with expectations from the Union Budget 2017. In the wake of demonetisation and GST implementation, all eyes are on Union Finance Minister Arun Jaitley who will deliver the Budget on February 1. While fast growing sectors like auto, manufacturing, services, IT etc view Budget as a big event for themselves, in the last two years, one more sector has joined the list – Start-ups. Since the launch of Start-up India last year, it is evident that this sector too features among the priority agenda of the Finance Ministry. In the jobless growth being faced throughout the world, Indian start-ups have generated lakhs of jobs over the years and continue to do so.
Overall, I expect the Budget will be positive and favourable – especially towards the poor, the middle-class and the business community. I believe that these people were the most affected in the short-run by demonetization. To bolster these sections of the population further, I also expect incentives on direct tax, which will further disincentive the need for black money. My expectation is that these tax incentives will translate into lower rates on personal income and corporate taxes.
While on tax incentives, concessions on employee stock options, unlisted securities and convertible instruments would be very welcome. Specifically for start-ups, better tax breaks in terms of Section 56, Long Term Capital Gain (LTCG) and MAT are expected to be a priority. Nirmala Sitharaman, Commerce and Industry Minister, has already indicated that they have sent their feedback to the Finance Ministry to extend tax holiday on start-ups from three to seven years and exemption from MAT. We hope to see an announcement on tax related matters in the Budget this year.
The implementation of GST is another major theme in this Budget. This will help rationalise the existing multiple tax structure and provide relief to the industry, especially e-commerce and similar online businesses.
Thanks to demonetization, digital economy is becoming a reality for India. I think that the Start-Up India Initiative could get a push for measures that would enable the upgradation of digital infrastructure across the country. Alongside, steps should also be taken by the Government to promote digital literacy and connect cities, towns and villages with high- speed internet networks to support the transition to a digital economy. Similarly, I also expect that there will be a slew of measures as incentives for digital payments. This would greatly benefit the e-commerce industry and digitalisation of payments overall. It goes without saying that such a push towards digitisation can be beneficial only if the Government were to do away with surcharges on card and digitised payments.
On a related note, I also expect that the Government can create an institutional framework akin to bank in a box systems. While the larger private sector benefit from a greater push towards digitisation, the benefits will be manifold for start-ups focusing at B2G with UPI and BHIM at the core of their service delivery.
With regards to SMEs, loans availed individually or in a pool, should be recognised as a separate asset class and should be listed accordingly. The recent announcement by the government on extension of credit guarantee limits to SME loans up to INR 2 crore, and also extending the same to loans disbursed by NBFCs, is a step in the positive direction. This ensures that a lot of new-age alternate SME leaders will also be covered under this scheme and this will increase penetration in the segment.
I believe, today start-ups are mainstream in India and every FM in years to come has to take feedback from the industry, as this will be growth and employment driver in years to come.
The writer is managing partner, Unicorn India Ventures