P Venkatesh Director Maveric Systems Start-up Expects Tax Concessions
India is becoming a growing hub for home grown start-ups. This is across some vital industries like Health care, Logistics, Power and Finance. In order to encourage that, the following can be done: Remove the Angel tax; if it cannot be abolished for whatever the reasons, bring down the tax to 10% from the current 30%; also clarify the valuation method to be applied in this which is free of ambiguity.
Provide tax credits for failed ventures at twice the investment; encouraging shift in investment to early stage ventures is a critical need at this moment. It would certainly enable a quick decision making on the venture and also provide relief for entrepreneurs who may have to hold the strain of the drained investment in a failed venture to recoup and probably re-try some other venture. Channel a part of the Research and development spend of the government to this sector and thereby encouraging new start-ups. Indirect tax concession for core and vital sectors. The vital industries like Health care, Logistics, Power and Finance would greatly benefit from Digitization in not only for extending the reach but also bringing down the cost. This would have spiraling effect on the manufacturing industry in general to become competitive. Therefore digital-only units of these industries should have a tax holiday both from indirect tax- GST- and direct tax for a period of 5 years at the minimum. Industries using services from these units should be exempt from being charged the indirect tax on those services; and Industries that source more than 50% from these units of their overall services should be granted a tax incentive of 20% remission in their corporate and indirect tax-GST.
Reduction in Corporate tax
The focus should now be in stimulating the indirect tax. Therefore the maximum corporate tax rate has already been brought down from 35% to 21% and this can progressively be reduced further to say, 15%. Similarly, most of the service sectors especially IT who are export earners pay minimum alternate tax at 18.50%. This should be brought down to 10% and abolished over time.
In order to facilitate scale-up and also to encourage not to automate everything unless that is necessary, 15% of new recruit payroll cost should become deductible in tax if the new recruit exceeds 15% of the overall payroll count. Instead of a flat rate, a slab rate can be introduced especially for the Small and Medium Enterprises (SME) which goes either with the slabs of the number of people deployed 500-750, 750-1250 etc.
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