Pre budget: Skewed tax regime puts odds against enterprise
25 Feb 2015
Small industry and start-ups are sore that the effective rate of corporate income tax ids skewed against enterprise – that small businesses and start-ups end up paying more by way of tax than big companies.
''It is rather strange that small business and startups have an effective taxation rate of 26.73 per cent while large companies pay an effective tax rate of 20.97 per cent. This is perverse from economics lens,'' points out Sanjeeva Shivesh, CEO and founder of The Entrepreneurship School.
''I expect this budget to be a defining budget from the FM. India has enormous entrepreneurial energies which must be unleashed to create new jobs and prosperity. The prime minister has given several messages in the last 9 months, but these needs to be supported in the budget. One of the key expectations is on 'Make in India''. This should be about Indian entrepreneurship. This requires encouragement. Ministry of Entrepreneurship has been setup in 2014, but is yet to get into action, added Shivesh.
''Angel-tax' introduced by the Finance Act 2012 proved to be a big blow for start-ups eyeing angel funding. Implementation of this tax forced many start-ups to shift base out of India. Though market regulator SEBI has now recognized angel groups as a separate fund category, income-tax exemption on angel fund investments is the much required need of the hour.
''Most start-ups are cash-starved in their initial years of operations. Direct and indirect tax (service tax, customs) incentives would go a long way in raising the business sentiment and encourage opening up of new businesses in desired sectors,'' he added.
Lastly, doing business in India is still a cumbersome process. Multiple registrations, red-tapism and long wait periods mar the prospects of starting up a new business.
Though the new government seems to have taken recognition of this fact, faster reforms in law and lesser regulations will make life simpler for start-ups, that are presently left grappling while complying with the numerous provisions under different laws. Ease of doing business would also prove to be a catalyst in attracting foreign investment into India.
