For e-commerce companies in India, particularly online start-ups, 2015-16 Union Budget has come as a breather. Announcements such as allocations of Rs 1,000 crores to start up and technology sectors, promotion of cashless transactions to curb black money and reduction in Corporate tax from 30 per cent to 25 per cent over next four years, have made ample clear government’s intention to promote e-commerce, entrepreneurship and innovation.
Most of the e-commerce and online start-up companies had great expectations from the budget as they believed that the recommendations would usher a new era of growth on them.
The fund allocation proposal to start-up companies will encourage business sentiments, trigger healthy competition and also increase employment opportunities in ecommerce and retail sectors. Though the announcement has been welcomed by budding entrepreneurs, the implementation is a daunting task, feel experts. Reducing corporate tax by five per cent is another major step that would favour emerging companies.
The budget also promotes cashless transactions through government-sponsored RUPay debit cards which will works towards the benefit of ecommerce businesses. The cashless transactions is also likely to boost the growth of less-known Point of Sale (POS) industry which provides all equipment related to retail payment such as touch screens, credit/debit card readers, barcode readers, barcode printers, cash registers, etc.
This will also make all transactions accountable and reduce Cash on Delivery practice, which is high at present.
The tax reduction on royalty charges for technical-related services from 25 per cent to 10 per cent will make such services cost-effective and will ultimately bolster their business.
On the flip side, for e-commerce, FDI or a tax holiday hasn’t come calling, and it is also disappointing to note that GST introduction has been deferred by another 12 months (2015-16). GST would have helped business entities who have been struggling with the differentiated tax laws and also for people who are looking to have Pan-India operations, according to industry sources.
The five per cent reduction of Corporate Tax is a decision taken with powerful vision. “Reduction in corporate tax in a phased manner is a welcome move even though businesses should be prepared to forego exemptions,” feels Rana Kapoor, president, Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“Other credible measures include a boost to SMEs through Mudra Bank, major initiatives have been taken for deepening financial markets like bonds, besides the decision to monetize gold are well thought measures,” opines Kapoor.
Industries believe that overall, government has provided a progressive budget for 2015-16, looking towards creating modern India.