As the country gears up for the Budget 2023 today, excitement and expectations are running high among the Indian startups and investors community. While some of the common expectations amid the gloomy layoff season following a dip in funding and strong economic headwinds certainly revolve around changes in tax slabs, announcement of new incentives, etc., the Indian startup and investor ecosystem will also be keenly waiting for some policy and regulatory reforms also.

The expectation is riding high because the expert panel headed by M Damodaran, which was set up to suggest measures to address regulatory and other issues to enable the scaling up of VC/PE investments, has submitted its recommendations for the upcoming Union Budget.

“Some expectations include making share for share exchange a tax-neutral transaction for faster corporate M&As and ensuring parity on tax rates for listed and unlisted securities. We also believe making ESOPs taxable only at the time of transfer of shares and as capital gains will encourage more startups to be domiciled in India,” says Harshal Kamdar, CFO, Sequoia India.

NASSCOM, in its list of recommendations, also proposed harmonization of tax rate for resident investors on unlisted shares issued by startups, rationalization scope of S.68 of IT Act, etc.

As the government signaled its intent to be digital-first and reform-friendly, startups are hoping for more friendly policies, tax incentives.

Here are a industry wise snapshot of the startup budget wishlist:

EdTech

The sector would like to see the strengthening of the digital infrastructure to make education more accessible to the country’s remotest areas.

Mridul Ranjan Sahu, Co-founder, CuriousJr said, “National Education Policy 2020 wishes to target investment in education at 6% of GDP. Currently, it is at 3.1%. In the upcoming budget, the government should focus on NEP’s strong emphasis on teaching students 21st century skills like- problem solving, creative & critical thinking, digital literacy, experiential learning and global competency. This year we expect to promote the e-learning programme, with more tax incentives, that will boost the ecosystem, and sustainability.”

Hemant Sahal, Founder & CEO, CollPoll said, “We would like to see the strengthening of the digital infrastructure of higher education institutions to make education more accessible to the country’s remotest areas.”

HealthTech

The increase in allocation of budget for National Health Mission (NHM) and launch of the ‘National tele-mental health programme’ in the last Union Budget 2022 was a step forward in the right direction, feels the players.

Namit Chugh, Investment Lead, W Health Ventures says, “On the digital front, now that a robust platform and infrastructure for managing digital registries of healthcare providers and patients is created, there is a dire need to boost adoption and accessibility. The government should allocate more budget for rolling out this initiative. The creation of longitudinal data for masses will unlock several use cases such as data interoperability, personalized healthcare recommendations, hyperlocal pharmacy data, etc. and will further accelerate India’s digital health agenda.”

InsurTech
As of now, insurance intermediaries like agents and brokers have to renew their license at regular intervals.

“While the regulator IRDAI had announced its intention to scrap the renewal process last year, it is yet to see progress on the regulation side. The government should make a formal announcement in the budget and expedite this process to offer a one-time license. This will help reduce the burden of compliance and get more players in the distribution space and consequently help improve insurance penetration in the country,” says Anuj Parekh, Co-founder & CEO, Healthysure.

Virtual Digital Asset:

In order to track and monitor Virtual Digital Asset (VDA) transactions, a TDS mandate was announced last year.

Sumit Gupta, Co-founder & CEO, CoinDCX says, “Through our representation for the upcoming Union Budget 2023 – 2024, we have suggested that the rate of TDS be brought down to 0.01%. This lower rate will help Indian VDA businesses offer competitive prices to Indian VDA users and protect them from exposure to unregulated foreign exchanges.”

Gaming and eSports

2023 began with some important measures taken by the upcoming draft of online gaming rules which aim to safeguard and regulate online gaming.

Shubhodip Pal, Co-founder & CEO, Googly, a multigaming platform says, “As a startup, we faced some challenges because of a lack of clarity on definitions of skill gaming. The AVGC Task Force announcement in the last budget was a step in the right direction and we hope similar steps are made in this budget to improve the esports and gaming infrastructure in the country. We hope the budget and subsequent policies by the government will provide more clarity on these ambiguities as it is critical for unlocking the true potential of the sector and attracting investments. The existing goods and services tax (GST) rate applicable to the gaming industry is 18%, and we hope for it to be lowered.”

2023 is likely to be a tough year for the global economy. Against the dollar, developing market currencies, including the Indian rupee, have been under tremendous pressure ever since the talks of the looming slowdown began, feels Gaurav Agarwal, Co-founder, Gamezop, an HTML5 game publishing company.

“In the midst of this, gaming has the potential to become a sector that brings in export revenue as Indian gaming companies find global users for their titles. I am hopeful that the FM takes note of this and considers a well-defined Duty Credit Scrips scheme for India gaming companies bringing in foreign currency into the economy,” says he.

EV:

EV ecosystem players feel a PLI scheme for battery pack manufacturers, along with an extension of the FAME II Subsidy Program beyond March 2024 will help in making electric vehicles more affordable and accessible to customers.

Pratik Kamdar, Co-founder, Neuron Energy says, “The sector is counting on the government to promote carbon credits by enacting regulations that encourage businesses to cut their carbon emissions.” A GST cut from 18% to 5% on lithium-ion battery packs and cells will benefit the Indian EV industry which mainly relies on batteries, he added.

“With the government’s push for a greener and more sustainable future, I hope to see measures that will make financing options more accessible to the masses. This could be in the form of tax benefits or subsidies for those who opt for green vehicles, or the introduction of more innovative financing models,” says Aalesh Avlani, Founder, Credit Wise Capital.

Note: This article is the 5th in line of a short Budget series from ETCIO