Union Budget 2017: IT, E-Commerce Sector's Wishlist

by Sohini Bagchi    Jan 31, 2017

The Union Budget 2017 will be announced on Wednesday, February 1 by the Finance Minister, Arun Jaitley. Experts believe the upcoming budget to be presented on Wednesday will help the government set the terms for the future. Like the previous year’s Union Budget, this year too the technology industry comprising software and hardware players, ecommerce and startups as well as telecom are expecting an increased focus on initiatives like Make in India and Digital India.

The budget also comes nearly four months after the government announced its demonetization of the old currency notes, which in turn has [and will continue to] push the digital economy. The industries are also looking for several tax reforms including General Sales Tax (GST) and other sops to help them do business in the country with ease.

Here’s what the tech industry is looking at from Union Budget 2017.

 

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Smartphone/handset players

Last year’s Budget saw an increased emphasis on local manufacturing and making imports of the components expensive. This year too the government is likely to continue the measures in order to bolster the Make in India initiative. The handset players are also looking for relaxation in taxes for making affordable handsets. These handsets are also expected to play a key role in adoption of digital payments, considering the government is looking at initiatives like BHIM app, UPI, USSD and Aadhaar-based payments. At the same time, handset players are looking for measures for local manufacturing in this Union Budget. The players have also wished for measures to make the country not only self-dependant in terms of manufacturing, but also evolve it into an export hub.

“We expect a long-term and stable policy on mobile manufacturing in India. The industry has huge potential and can supplement government initiatives of ‘Make in India’ with highly technical product if focused. Incentives to create sufficient technical manpower will lay the foundation of a strong and robust manufacturing base in India. Further, a clearly laid out research and development policy is necessary to succeed in a highly technical industry like ours and will help bring component manufacturing base in India to save precious foreign exchange.  In the end, to create a truly inclusive digital economy, affordable mobile handset or consumer durable items up to certain value should be given a concessional duty treatment.” - Rajeev Jain, CFO, Intex Technologies

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“The recent demontization reform by the Government set the ground for a cashless economy. Mobile banking will become imperative for everybody, it will definitely increase the user base. especially low end smartphones will be on high demand and to support the rural population & low income strata, the Govt should give tax holidays on phones less than Rs. 5000. Similar support was offered by Chhattisgarh Govt in recent times.” Pankaj Anand, CEO, Jivi Mobiles

Read more: Budget 2017: Expectations From India’s Telecom Sector

“While the consumer durable industry awaits to recover from the demonetization phenomenon, it also anticipates to be placed in the lowest – 18 percent slab in the upcoming GST reforms. Further, a clarity on Duty Differential for mobile handsets will give the necessary impetus to Make-in-India under the GST regime.” - Manish Sharma, President and CEO, Panasonic India and South Asia

“To make India an export hub for electronics amidst growing competition, the Budget should include benefits like 10 years tax holiday for local mobile manufacturers, continued differential duty structure to encourage enhanced local manufacturing in India, increased incentive under MEIS scheme to five percent from the current level of two percent, exemption of duty on import of capital goods used in the manufacturing of mobile handsets and components, redraw e-waste norms which are regressive and unpredictable.”- Ritesh Suneja, Group CFO, Lava

Read more: IoT, E-Commerce To Push India’s Semicon Industry

E-Commerce and digital companies

The e-commerce industry is one of the fastest-growing sectors in India, and the Government’s demonetization move in November 2016 helped the entire sector as people adopted e-wallets and other payment options.With the Government’s emphasis on a less-cash economy, e-commerce players are seeking sops on digital transactions in tomorrow’s budget. Likewise, other players in the digital space have sought incentives. The government has already been encouraging local entrepreneurship with missions like Startup India. Results of these efforts are quite evident with a number of new startups making a name for themselves in the Indian market. Since startups mostly rely on internet, the players are looking for the government to encourage digital payments, faster connectivity and reforms that make it easier for new players to set up their companies.

ecommerce

The Indian e-commerce industry which is looking to reach $28 billion by 2019-20 (according to a Kotak Institutional equities) would be looking for some positive outcomes both in terms of tax relaxation and more freedom of operation. The sector would be eagerly awaiting the centralized registration under the proposed goods and service tax (GST) regime. Multiple registration for e-commerce might be cumbersome as there could be lack of coordination within states, viewing the same transaction differently, and further complicating it for these providers. Moreover, the sector will also look at receiving more clarity for FDI in B2C e-commerce through an automatic route. Also, a lot of e-commerce companies would be expecting relaxation in the limit of business coming from a single vendor or marketplace to be increased beyond 25%” - Harshvardhan Lunia, Cofounder and CEO, Lendingkart

“To further the cause of digitization and boosting the digital ecosystem, the government should abolish service tax on Internet-related services such as broadband services, internet advertising, food delivery, so on. This will encourage the adoption of the same and also allow for payments to be become digital.”- Satya Prabhakar – Founder & CEO, Sulekha.com

“E-commerce sector in India continues to grow at scorching pace thereby contributing to Government’s ambitious plans around “Make in India” & employment generation. We anticipate that the government will leverage Budget 2017 to provide further impetus to this sector through tax reforms and enhanced level playing field. GST is the cornerstone to releasing the dream of one-country one-market, as it can potentially resolve impediments in Inter-State movement, unburden e-Commerce of multitude of taxes e.g. Entry Tax etc. All Indians aspire to own their home and we hope that the Budget 2017 accelerates development of urban infrastructure and provides incentive to home buyers. It will also support our mission of helping 20 million customers create beautiful homes by 2020.” Neelesh Talathi, CFO-Pepperfry.com

“This Union Budget will be a very crucial for the country and the BJP Government. Government has the twin agenda of meeting the GDP growth expectations as well as to demonstrate beyond doubt that the demonetization was just one of several steps bring taken to fight corruption and was not a cheap election stunt. In this budget, building on the anti-corruption theme, we expect to see rollout of direct tax reforms to provide stronger disincentives for black economy, land registration reforms, greater push towards digitizations, new programs for economic inclusion & make in India.” Sanjay Sethi, CEO & Co-founder, ShopClues

“Keeping the startup industry in mind, the most important thing for a government to do, is to steer clear of setting too many policies and rules as well as making doing business very straightforward and easy. Minimum governance is actually very good.” - Abhiraj Bhal Co-founder, UrbanClap.

“This year the Railway Budget will be presented alongside the Union Budget and we are hoping for the government to announce developments in terms of security and modernization to eliminate incidences of derailment and other accidents. We also anticipate a lowered GST on travel related services and the government investing heavily in the development of travel infrastructure.” - Aloke Bajpai, CEO & Cofounder, ixigo

“While the full effects of demonetization are still playing out and with the uncertainty surrounding external factors like Brexit and a Trump presidency still on the horizon, India’s continued growth story surely lies in continuing to focus on the vital SME sector which will continue to employ around 40% of India’s workforce. It is this very sector where we would like to see the Government providing incentives (and at least no disincentives) to lead the way to further go cashless, comply with the incoming GST legislation and to continue to be the growth engine for the economy as a whole. We certainly look forward to Union Budget 2017 to create a favorable business climate for SMEs in India.” -Peter Fleming, Chief Financial Officer, Deskera

“The Indian economy was growing at a rapid pace registering GDP growth of around 7.6% and then the brakes came on as a result of the unexpected demonetisation announcement. The decision though commendable from the combating black money aspect, has caused significant liquidity issues in the economy. Government is making conscious efforts to become cashless economy - this will be very beneficial for ecommerce businesses. Also, to reduce the imported products they might increase the IT, but GST will help luxury business survive it gets passed this year.”Rashi Menda, CEO & Founder, Zapyle

“We expect this years budget to be start up friendly specially because of demonetization. Tax exemptions through online payments such as net banking, UPI, credit and debit cards are likely. A large percentage of Start-ups & SMEs in India are still facing funding shortage thus they are not able to scale up. An efficient policy framework is required to support this sector that will create swift, easy and efficient loan options for SMEs and Start-ups.” Himanshu Bindal, CEO & Founder, One Internet

“The startup ecosystem in India is flourishing every year. Some startups have seen a phenomenal growth & success towards implementation of their ideas last year. And for further boost to growth of startup economy, the upcoming budget announcement is very crucial. There is expectation towards various kind of exemptions on taxes like the exemption under the minimum alternate tax for startups​, tax concessions for the ESOPs, unlisted securities and convertible instruments​. ​Post demonetization, we have witnessed growing traction for technology startups, the government should also recognize their contribution in the digital economy vision of India by considering extra incentives/concessions” Manavjeet Singh, CEO & Founder, Rubique 

IT [software and services]

The global slowdown has taken its toll on the global IT services companies across the globe and Indian vendors are not immune to it either. In addition growing protectionism in the Western markets has complicated the matters further.  With the government set to present the Union Budget 2017-18 on February 1, some of the leading tech companies and IT manufacturers are bracing up for the implementation of the much anticipated Goods and Services Tax (GST), demanding that the excise duty structure should be rationalised.

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“IT companies have been in the forefront in earning export revenues for the country. The SEZ scheme played a major role in developing this sector and consequent employment generation. The government should encourage further investments in SEZ and should withdraw or extend the sun-set clause of 2020. Indian IT players are facing denial of tax exemption under section 10A and 10AA by the Tax authorities on the ground of “body shopping”. Huge amount of tax demands have been raised and are pending at various stages of litigation. A clear direction on this matter may help resolve this long pending issues.” - Sanjay Jalona, MD & CEO, L&T Infotech 

“The government’s objective should be to enable this transition from the current taxation system as smooth and orderly as possible — both for itself and for businesses and consumers. It will be important to outline a roadmap for IT manufacturers for the implementation of the new GST policy well in time.” Rajiv Srivastava, Managing Director, HP India

“As IT enabled services industry embrace the influx of enterprise applications and cater to the modern business requirements, the sector expects unvarying support from the Government to promote R&D practices in the country. To maintain its leadership position, the sector looks forward to continued support from the Government to not only ensure the financial viability of the sector but also to trigger a wave of innovation particularly on the backdrop of the digital demand from global organizations. Lastly, the demonetisation measure has triggered a positive impact on adoption of digitization and Digital India has set foot in a true and meaningful sense. On this backdrop, Government support in terms of tax rebates, concessions for new-age technological innovations would serve a long way towards further enhancing India’s position in the global Intellectual Property (IP) landscape.” - L C Singh, Vice Chairman & CEO (Founder) at Nihilent Technologies

“The government should reduce corporate tax rates to 18% including surcharges and cess, now that more tax is going to enter the tax net with demonetization. Rationalizing of transfer pricing rules together with transparency and simplicity in its implementation. Given that start-ups hardly make profits in the initial years, direct and indirect tax exemption for start-ups to be increased to the first seven years. This will help bring down the cash outflows and give them a much-needed boost. There should be tax incentives, grants and support schemes targeted to boost the start-up ecosystem. Also, dual tax of software hopefully goes off once GST is implemented. The government should get this rolled out fast.” -Srividya Kannan, Founder, Director – Avaali Solutions Pvt Ltd.

“Modi-led government transformed the Indian industry outlook by initiating multiple programs. Today, Make In India, Digital India, Standup India and Startup India programs not only enrich entrepreneurial dreams but also provide financial aid for making it viable to create long term sustainable impact. We expect focus on these programs to be maintained in this Union Budget as well for positive investor sentiments and overall long term growth. Additionally, India’s cashless dream is expected to come alive basis policy changes to enable infrastructure for 4G smartphone growth, formalization of UPI digital payment mode for its widespread application and additional Govt. initiatives focused on regional smartphone users.” Rakesh Deshmukh, Co-Founder and CEO, Indus OS

“Just like the mobile phone players, the IT industry is looking for more rebates on desktops and other telecommunications equipment. “The IT industry has been seeking an extension of the excise duty differential benefit scheme to cover all ITA products including desktops, laptops, telecommunications equipment, etc. This would mean a zero duty on all inputs for manufacturing of electronic components and parts, including dual use inputs for all ITA-1 items which results in inverted duty scenario.” - Alok Ohrie, President and Managing Director, India Commercial, Dell EMC

The government needs to significantly increase spending in both their vision for Digital India and Education. The impact of demonetization on the economy will be long lasting if it’s not now bolstered with an Indian equivalent of quantitative easing similar to what the US and western economies did after the 2008 banking collapse.- Suneet Singh Tuli founder and CEO, DataWind Inc

Fintech companies

Mobile apps and wallets are becoming mainstream and have seen a massive spike in terms of user adoptions and transactions in recent months, especially post the monetization move. Mobile wallet companies are making full use of the opportunity to push their services with new partners and inclusion of new features. These companies are expecting initiatives that help increase penetration of internet and concessions on adopting digital payments.

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“Tax rebates can be given to merchants doing a significant share of their sales through any digital method. In addition to digital payments, initiatives should be taken to increase access to credit. Given the decreasing cost of smartphones, the innovation in the fin-tech industry, and the awareness and momentum created by various digital initiatives, India has a real opportunity over the next couple of years. Conducive policies for digital infrastructure, and creating a level playing field between traditional financial institutions and innovative financial technology companies can help us drive financial inclusion for hundreds of millions of Indians.” - Madhur Deora, CFO, Paytm

“Steps should be taken to promote digital literacy and connect cities, towns and villages with high-speed internet networks so that every citizen is empowered with access to a mobile broadband connection. Access to online services should actually be a fundamental right.” -Bipin Preet Singh, Founder & CEO, MobiKwik.

“The demonetization drive needs to be followed by strong, systematic and organized steps by the government, and we need to rope in users from tier 2, 3 and 4 cities and towns. My only expectation from the Union Budget 2017 is the availability of enough funds dedicated to imparting and increasing knowledge and creating awareness amongst Indian users, both merchants and consumers, on how to pay and accept payments digitally.”Shailaz Nag, COO, PayU India

“The general consensus is that the 2017 Union Budget will need to factor in the political and economic compulsions brought on by the demonetization initiative. There is widespread expectation that the Budget will usher in welcome changes in personal income tax, as well as corporate tax, and that there will be an easing of the tax rates on all income slabs. We will also probably see incentives that encourage greater adoption of digital payments and a move towards a cashless, or at least less-cash, economy. The NDA governments’s attention to the rural economy will continue with more rural and farmer-friendly development schemes.” - Ranjit Punja, CEO & CO-founder, CreditMantri

“This is going to be a very tough balancing act for government. So far middle class has been at the receiving end. Be it de-monetization, fuel prices, various cess and taxes. This segment has been expecting Direct (Income Tax) slab reduction from last two budgets. They also make some equity and real estate investments, which has received the burnt of executive decisions. Naturally, they are awaiting much needed break in tax slabs. On the other hand, there is widespread misery in agrarian community. Farmer suicide, mounting debt, crop losses and price reduction due to restricted goods movement during demonetization. SME sector is struggling to stay afloat as bank credit is at its lowest. And do not forget this is going to be the last budget sans election fervour. So, a very crucial one to watch out for. From sectoral point of view, we wish that tax on services (even under GST) to remain at 14% level, and additions cess and levies should be removed.” -  Satyam Kumar, CEO, Loantap