Startup India final break from licence raj; will scrap tax on seed funding: Arun Jaitley
Startup India will be the final break from the conventional licencse raj in the country said finance minister Arun Jaitley today announcing a few steps aimed at giving a bog boost to the entrepreneurial spirit in the country.
Arun Jaitley in a file photo. PTI
He said the government will act as the facilitator for the startups and won’t have an interventionist approach.
“Startup India is the ultimate break that you have from the conventional license raj of India,” the minister said at the launch of the event.
Elaborating on the point he said though India ended the licence raj in 1991 with the economic liberalisation, the government continued to exercise control over many key areas. This throttled the startups and entrepreneur spirit in the country.
He also announced that the government will in the next Budget scrap the tax on seed funding by ange investors, which has been identified as a major impediment for entrepreneurs to get domestic funds
“We have already worked upon entrepreneurial friendly taxation. Some of this can be done through notification, some steps have been taken and other requires legislative consent that would be included when the finance bill is presented,” said Jaitley.
He also said the government and the Reserve Bank of India will over the next few months add to banks’ ability to lend.
Credit growth is critical to boost India’s sluggish economic growth but has remained subdued, with banks struggling with crippling bad debts and insufficient capital.
“The Reserve Bank (of India) and the government, acting in tandem, are going to add to bankers’ ability to lend with vigor and in greater amounts,” Jaitley said without giving details.
On Friday, commerce and industry Minister Nirmala Sitharaman had said in Twitter chat that transparent tax regime, easier registration norms and simple exit policy will be provided to give a boost to start-ups.
The measure is aimed at easing up the process to start up and doing business in the country. The move is aimed at preventing the exodus of satartups from the country due to difficulties in doing business. According to certain estimates around 65 percent of the startups have moved out of India due to uncertain taxation.
An article in Inc42 said: “The tax treatment and difficulties of doing business in India, as startups scale, has made many startups migrate to countries like Singapore where there are less difficulties in taxation. Around 65% of successful startups, that began in India, have moved out of the country.”
The government’s initiatives have to be viewed in this context.
Finance Minister Arun Jaitley has already spoken in different contexts about simplifying taxation and initiatives are already in place, Sitharaman said in the chat.
“The government is working towards ensuring transparency, simplification and predictability in tax structure,” she said while replying to question during the chat.
When asked what kind of support government would provide, she said: “Easier registration, compliance and exit (norms), a conducive tax regime, stronger incubation network and rest tomorrow”.
“A greater synergy between the startups, venture funds, seed funds, incubators, industry and the government,” she said.
The minister also said that school curriculum is becoming dynamic to include thoughts about start-ups.
She said the Centre would reach out to the states also on promoting budding entrepreneurs. All stakeholder including state governments need to collaborate to make it a success, Sitharaman said, adding ‘Startup India’ would not only focus on tech start-ups, “all innovative ideas are welcome”.
She said that the ‘Startup India’ is an initiative to facilitate budding entrepreneurs. Further she said the government is taking several steps to improve ease of doing business and “the accent is still on it. Philosophy is to remove red tape”.
When asked about issues which start-ups can solve for India, she said: “Through their innovative ways, drive and initiative they can address many consumer oriented challenges”.
She also said that only 9% of start-ups in India are led by women. “We shall converse with them to lead them better,” she added. She also said that failure should not be held against a startup.