Clipped from: https://www.deccanherald.com/opinion/budget-2023-offers-a-mixed-bag-for-startups-1186872.html
Startups in the agriculture space have something to cheer; but concerns raised by startups in the tech sector remain unanswered
Finance Minister Nirmala Sitharaman at post Budget presser. Credit: PTI Photo
While the Narendra Modi-led government has been pushing through reforms all through the year, the Union Budget continues to symbolise the heavy expectations of the masses and industry. With the world going through challenging times due to a bleak macroeconomic outlook, Union Budget 2023 is roaring ahead, pumping up increased capital expenditure of Rs 10 lakh crore. Such high allocations will hopefully lead to a surge in jobs, livelihoods, and infrastructure growth in India.
Startups in the agriculture space have something to cheer about as Finance Minister Nirmala Sitharaman announced the ‘Agriculture Accelerator Fund’ that has the potential to unleash innovation and trigger newer business models. Other notable technology-based announcements include the Centre for Excellence for Artificial Intelligence for Make AI in India, Make AI work for India, and a New National Data Governance Policy to support innovation and research for startups and academia.
Further the expansion of the scope of Digi-locker and expansion of the digital ecosystem for skilling with the launch of a unified scale and digital platform for enabling demand-based skilling, linking with employers including the MSMEs and facilitating access to entrepreneurship schemes. Launch of the next phase of the PM Kaushal Vikas Yojana to cover new emerging tech areas around coding, AI, mechatronics, robotics, drones, and IoT.
Upskilling India’s youth for international opportunities by setting up 30 Skill India international centres across different states. The launch of a unified ‘Skill India Digital Platform’ that will enable demand-based formal skilling, link the youth with employers including MSMEs, and facilitate access to entrepreneurship schemes, etc., are all innovative steps in the right direction. Simplification of the KYC process and PAN to be used as a common identifier for all digital systems of specified government agencies are all welcome steps.
However, concerns of startups in different tech sectors that were raised in the previous budgets remain unaddressed with some becoming even more vexing. Budget 2023 has not addressed long-pending issues faced by the startups around onerous TDS clauses that now seem to be ever-expanding variants under Section 194 that impact livelihoods across different segments of the gig economy. Even Section 206C which mandates the collection of tax from anyone planning an overseas travel programme has increased now from 5 per cent to a massive 20 per cent. Unfortunately, this will now push Indian consumers seeking to travel abroad to book their travel requirements in overseas-based foreign travel apps, thereby hurting the business of online travel operators domiciled in India. This is in addition to hurting tax revenue collections as evidenced in all startup sectors.
There is also mention of bringing the non-resident investors within the ambit of Section 56(2)(viib) to eliminate the possibility of tax avoidance. Clarification needs to be made on whether this will apply to individual investors — only then will it affect the startup funding ecosystem.
The other area of focus in this Budget has been the taxation of online gaming companies, which seems to be moving towards some clarity with Clause 54 having inserted Section 115BBJ relating to tax on winnings from online games. The proposed Section states that where the total income of an assessee includes any income by way of winnings from any online game, the income tax payable shall be the aggregate of the amount of income tax calculated on net winnings, at 30 per cent. The threshold of Rs 10,000 for deduction seems to have also been done away with the stated intent of preventing tax avoidance. The government needs to clarify what it means by net winnings and the manner and methodology of its calculation as this can have a significant bearing on the industry and its players. Removal of the basic threshold can potentially hurt small casual players and many startups who have such categories playing for small amounts.
Overall, Budget 2023 is a forward-looking, visionary budget that needs to quickly clean up past ease of doing business baggage, including new ones.
(Rameesh Kailasam is CEO, Indiatech.org. Twitter: @rameeshkailasam)
The views expressed are the author’s own. They do not necessarily reflect the views of DH.