Fine-tune tax structure for tech, Internet start-ups

Vineet Jawa, Co-Founder, IDfy and Gaboli

Dear Mr Finance Minister,

I am writing to you as an Internet entrepreneur in India. Like many others, I too returned from the UK to participate in this buzzing entrepreneurship economy. In India, ideas for start-ups are dime a dozen; the real challenge is implementing them. We are in dire need of the government easing the regulatory overhead for start-ups.

Make It Easier

A typical businessman in India has to pay income tax, service tax, value-added tax, excise duty, shops and establishments’ tax, professional tax and also participate in employer provident funds and employee state insurance schemes. Each tax is managed by different departments and involves various compliance activities including monthly payments, quarterly returns and annual returns. Each state has different rules with different forms, which change on a regular basis.

With Software as a Service (SaaS) and Cloud Computing trends, traditional definitions of VAT and Service Tax do not apply. Most IT companies are now charging both goods tax and service tax simply to ensure compliance.

First, I request you to rapidly roll out the unified GST to simplify taxation. Second, I request clarity on taxation for tech companies with respect to VAT versus service tax.

Working capital schemes don’t work

Payment collections are the bane of every small business in India. India’s domestic clients have higher debtor days and higher bad debt ratios. Young companies need support to weather the storms.

The government has great schemes like CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises). Banks are also supposed to provide SME credit of upto Rs 5 lakh without demanding any collateral. But these banks are very hesitant to offer these schemes and they almost never offer them to IT start-ups due to lack of stock/inventory.

My third request, Mr Finance Minister, is to strengthen working capital schemes

Prepare kids for the marketplace

The mainstream higher education curriculum is a complete mismatch for the industry’s requirements. Students have to take up additional corporate training programmes to ensure employment. At the same time, companies have to train fresh graduates for at least three months before they can become economically productive.

My final request, Sir, is that the government revise the syllabus and contemporary education resources for mainstream colleges and professional courses, keeping this in mind.

Vineet Jawa was pivotal in conceptualising the product platform at the core of IDfy, an online service that screens job resumes for recruiters. He has over 9 years’ experience in account management and consulting along with a keen focus on web technologies and digital marketing.

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