As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2024-25, the Indian startup ecosystem is eagerly anticipating measures that will support their growth. Here’s what startups are hoping for from this year’s budget.
Overhauling the Taxation Regime
One of the primary expectations is a comprehensive reform of the taxation system. Startup founders are advocating for the removal of burdensome taxes such as the angel tax and corporate tax, as well as modifications to Section 68 of the Income Tax Act. Simplifying these aspects is crucial to fostering a more favorable environment for startups.
Tax Incentives for Deeptech Startups
Deeptech startups are calling for various tax incentives, including tax holidays, accelerated depreciation rates, and credits for R&D expenses. Additionally, they seek a reduction in GST for electronics R&D investments. These measures would significantly boost innovation and growth in the deeptech sector.
Infrastructure Development
Improving infrastructure, particularly last-mile connectivity, is another key demand. Startups believe that government investment in infrastructure can reduce logistics costs, thereby enhancing order fulfillment and reducing the cost of doing business. This would be especially beneficial for logistics and consumer-focused startups.
Spurring Foreign Direct Investment (FDI)
Many in the startup community are optimistic that the Budget will include measures to attract more FDI. A reduction in corporate tax rates to align with global standards is seen as a crucial step to make India an attractive destination for foreign investors, especially in emerging sectors like climate tech and green energy.
The climate tech industry is looking for reduced customs duties on solar energy imports, expansion of green finance, and a revision of GST on renewable energy sources. These measures are expected to attract international investors and support the growth of this vital sector.
Boosting Consumer Spending
Startups are also hopeful that the Budget will include measures to boost consumer spending. Higher capital allocation for manufacturing and infrastructure development is seen as a way to indirectly increase consumer spending. Additionally, improving last-mile connectivity in the logistics sector can help reduce costs, which can be passed on to consumers.
Unified Logistics Platform
There is a call for the government to develop a unified logistics platform to streamline regulatory frameworks and bring all stakeholders together. This would provide a significant boost to the logistics sector and support consumer internet firms in reducing last-mile delivery costs.
The EV industry is advocating for a reduction in GST rates on batteries from 18% to 5% and a reduction in customs duty for key components. These measures would support the transition towards green logistics and help reduce costs for consumer internet firms.
Expanding Production-Linked Incentive (PLI) Schemes
Manufacturing is expected to be a significant focus area in the Budget. The startup community wants the PLI schemes to be expanded across the value chain to ensure that incentives are not limited to top beneficiaries in end-product manufacturing. This expansion would support a broader range of manufacturing activities and drive growth in the sector.
AI Startups Seek Infrastructure Support
AI startups are particularly concerned about infrastructure. They are requesting subsidies for upfront costs associated with training and fine-tuning machine learning models for the first three years. Additionally, they want the government to waive or reduce import duties on GPUs and related hardware. Increased collaboration with government agencies and more AI-focused incubators are also high on their list of demands.
The AI sector is also seeking clear and consistent regulations that foster R&D without stifling innovation. Early-stage AI startups would benefit from tax benefits and policies that support their growth beyond the initial phases.
As the Union Budget 2024-25 is unveiled, the Indian startup ecosystem will be watching closely to see which of their demands are addressed. The hope is that the Budget will provide the necessary support to help startups thrive and drive economic growth in the country.
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