The e-commerce and startup sector in India has high expectations from the Union Budget 2016-17 and is looking forward to a clear stand on the laws and regulations related to the Online Commerce industry.
The sector is evolving at a fast pace but is struggling with old tax laws and regulations, as taxes are levied by both central as well as state governments. The e-commerce sector seeks the budget to give clarity on tax structure. The cash-on-delivery (COD) sales model has been introduced by most of the e-commerce players to tap potential customers. This has led to a debate on intra-state sale vs. inter-state sales tax laws. E-commerce sector has to typically cater to sale of products in all the states but various states have different regulations, so we need a uniformity of rules across states.
The e-commerce sector has to grapple with various taxes like VAT, CST, excise, and service taxes. Online companies would look forward to an integrated and uniform approach for tax laws and regulatory policies. We also expect that the GST is rolled out clearly in order to unlock issues faced by the e-commerce sector.
We expect the government to simplify tax regime for startups to foster innovation and create conducive ecosystem for entrepreneurs in the country. As a startup, we welcome the move by PM Modi to offer 3 years of tax exemption under the Start-Up India action plan; but more than exemption on Income tax, the statutory and regulatory compliances related to various filings like Service Tax returns, MCA filings, TDS returns and various state specific compliances should be simplified as the filing of these documents consumes a lot of time and bogs down a startup.
The Government should also introduce e-commerce and startup friendly initiatives that will boost the e-commerce industry. Exemption of the angel tax (that taxes the capital receipts) will help the startup industry, especially when financing from banks and VCs is unavailable. Even the tax rates for the investors should be rationalized, as they also take a risk by investing in startups. Favorable policy regulations like ease of compliance and tax exemptions will boost the sector and contribute to favourable growth of the economy.
A Dedicated Corpus of Funds announced by the government under Startup India action plan will definitely help entrepreneurs and startups, as many players struggle with funds in the initial stages. However, the Government must make sure that the funds are judiciously allocated so that there is uniform distribution across different industry sectors. Also, there should be limit on funds allocated to one startup.
The ‘Startup India, Standup India’ campaign has created excitement and raised hopes for the startups and entrepreneurs. We hope that the budget will lay down a clear roadmap on the execution of all the policies announced.