Start-ups are expecting a big push from the government, including steps to rationalise taxation and favorable policy changes to boost digital ecosystem

India is home to the world’s third-largest start-up ecosystem after the US and China. The start-ups have the potential to contribute 4-5 per cent to the country’s gross domestic product (GDP) over the next three to five years, a report by StrideOne noted. Since the launch of Startup India in 2016, the sector has created over 8.6 lakh direct jobs as on November 2022, according to the Department for Promotion of Industry and Internal Trade (DPIIT).
However, investments in the Indian start-up ecosystem have taken a big hit due to the funding winter. Start-ups witnessed a drop of 33 per cent in funding compared to CY21, according to a PwC India report titled, Startup Deals Tracker – CY22. This year, start-ups are expecting a big push from the government, including steps to rationalise taxation and favourable policy changes.

ESOP tax relaxation
Start-ups are expecting additional tax benefits. "We are expecting additional tax benefits and lower tax rates and extending the scope of employee stock ownership plan (ESOP) taxation reforms to start-ups," said Lalit Arora, co-founder, VingaJoy, a firm that deals with consumer electronics.
Chris George, CEO & Co-founder of QubeHealth also echoed similar thoughts. “Only a few companies registered under the Startup India Scheme are eligible for the 80iAC exemption. A wish would be to have taxes on ESOPs waived entirely or drastically reduced - after a particular tenure etc. so that the Company and the Employee are encouraged to build successful companies,” added George.
Startups invest in capital expenditure, often purchasing high-cost infrastructure. Waiver of taxes and duties on such investment would boost investment,” pointed out George.

"Consumer electronics manufacturers were left disappointed as there was no concession or GST rationalisation given on products. We expect reforms in the Budget to accelerate growth channelised by consumer demand,” said Arora of VingaJoy.

"Given that hearable devices are a new rage, it is high time that such devices are also incentivized under consumer device categories. As of now, hearables don’t get augmented by any specific government encouragement policy or subsidy," he added.

While the electronic vehicle sector demands such vehicles to be brought under the ambit of Priority Sector Lending. "It is imperative that financing of EVs be brought under the ambit of Priority Sector Lending (PSL); primarily as upcoming EV businesses encompass two sectors under PSL i.e. renewable energy and MSMEs. Public and private sector banks have generally been slow to financing EVs for business and commercial use, and bringing this under PSL will accelerate EV adoption to a critical mass of the population," said Gaurav Rathore, co-founder, EVeez, a company that provides e-bikes subscription.

The automobile sector has been through numerous ups and downs in recent years. In this year's Union Budget, the government must renew its focus on enhancing infrastructure to make the production and usage of EVs and EV-related features, like charging stations, easier," said Greg Moran, CEO, Zoomcar.

Need to build a strong supply chain
Some start-ups are looking for ease in the supply chain for the smooth functioning of e-commerce businesses. Shilpa Bhatia, founder, The Clothing Rental, an e-commerce portal said, “The retail industry and private sector players are willing to invest more in building efficient; strong supply chain infrastructure and technology innovation. The government should also focus on removing any hassles in the supply chain industry for smooth functioning. We also expect the government to restructure GST formalities, and create a national policy on retail among others that will benefit the growth of the sector.”

Strengthen digital ecosystem
While logistic start-ups are looking for a rise in fund allocation and ways to reduce input costs. "The government can unlock potential across the value chain by increasing fund allocation for infra projects, incentivizing value creators, streamlining permits protocol, and reducing input costs in running the logistics sector. Policies like NLP (National Logistics Policy) and ONDC (Open Network for Digital Commerce) must leverage ideas from private players and start-ups,” said Nayan Ratandhayara, Co-Founder and CEO Shipyaari.

Ratandhayara also suggested reducing taxes or tax breaks on equipment and technology used in logistics to aid companies to invest more in improving their fleet and related infrastructure. “It can be on the lines offered for electric vehicles in logistics. This will also allow players to bring in efficiencies at scale. Streamlining the process of granting permits and approvals will greatly propel the growth rate of the sector,” he added.

Gautam Kumar, COO and co-founder, FarEye said, “The logistics industry expects the government to take measures to expedite the integration and development of Unified Logistics Interface Platform (ULIP) which will unify digital logistics systems and enhance efficiency, transparency, and collaboration between various industry stakeholders."

"The government must look at incentivising logistics players that want to adopt artificial intelligence, Internet of Things, automation, and big data. We expect the government to give infrastructure projects like cold storage, logistics parks, and Dedicated Freight Corridors an adequate financial push toward faster completion,” added Kumar.

Mathew Joseph, COO & Co-founder, FreshToHome, said the Budget should allocate funds to build modern infrastructure solutions in wet markets and emphaise on making efficient use of available resources and training programmes, the government can uplift the community.

Even healthcare businesses want the government to focus on digitisation of the sector. Jerath Path Labs Managing Director Prashant Jerath said, “The new budget should focus on digitization in the healthcare sector via adoption of telemedicine/virtual care solutions, real-time health management, referral management systems as this could leverage the subsidies and/or indirect tax incentives for capital and operational expenses. Also, a deep-rooted investment in R&D should be very helpful, High end Equipment and facilities may be encouraged to be available by way of manufacturing or import. A focus on policies that support R&D activities, and a continuation of tax breaks on different medications."