Even as the Modi government promised extended sops to startups in India in 2017, many small business in India felt the heat as they received frequent tax notices.
According to a survey by social media community platform LocalCirles, around 80 percent of startups said that they haven’t benefited in any way from Startup India Mission.
The survey was conducted among more than 33,000 startups and entrepreneurs to find out how the 'Startup India Mission' was faring for them. It was also aimed at finding out the various challenges startups faced in India.
According to the survey, the whole GST (Goods and Services Tax) reverse charge on foreign services such as hosting, database retrieval, pay per use services used by startups goes against the premise of Startup India Mission.
Small businesses in India have to pay 18 percent GST under reverse charges for procuring these services from global players.
Around 41 percent of startups and SMEs said that GST has had a negative impact on their business.
Rest 31 percent were positive and about 28 percent were neutral.
Startups using digital advertising services from global companies such as Google, Facebook, Twitter are forced to pay 6 percent equalization levy on top of the invoice value as their billing entity is not registered in India.
They want billing from Indian offices of foreign companies be made mandatory to prevent double taxation.
Many of them have reported getting frequent tax notices due to a fund raise, change in valuations etc thereby leading to entrepreneurs spending significant time in tax offices and on compliance-related matters.
As a result, major startups such as Flipkart, Grofers, InMobi and Practo have decided to move their registered offices from India to Singapore.
Small business pay about 17% tax in Singapore compared to about 33% in India.
According to a 'status report' of Startup India, about Rs 605.7 crore has been committed by government to 17 Alternate Investment Funds and about 75 startups have been funded.
Around 4,536 companies have been recognized by DIPP as a 'startups'. However, only 74 startups have been approved for availing tax benefits.