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Startups: What the industry says about Budget 2023

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Reactions from industry captains on startup-related announcements in the current Budget that will have a bearing on allied retail businesses

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2023, the fifth budget of Modi 2.0 on February 1, 2023. In the last full-fledged Budget before the general elections next year, Sitharaman presented a budget that many consider could lead India onto the growth path of the future. Sitharaman announced major changes in tax slabs under the new tax regime that would put more money into the hands of the middle class and that brings cheers to many businesses from FMCG companies to retailers.

This Budget hopes to build on the foundation laid down in the previous Budget, and the blueprint drawn for India@100. “We envision a prosperous and inclusive India, in which the fruits of development reach all regions and citizens, especially our youth, women, farmers, OBCs, Scheduled Castes and Scheduled Tribes,” said Finance Minister, Nirmala Sitharaman in her Budget speech.

She further added, “In the 75th year of our Independence, the world has recognised the Indian economy as a ‘bright star’. Our current year’s economic growth is estimated to be at 7%. It is notable that this is the highest among all the major economies. This is in spite of the massive slowdown globally caused by Covid-19 and a war. The Indian economy is therefore on the right track, and despite a time of challenges, (is) heading towards a bright future.”

In a series of stories, IndiaRetailing brings you the opinion of leading industry experts on the Union Budget 2023. In the second feature of the series, we feature reactions to announcements of startups.

Anshita Mehrotra, founder, Fix My Curls 

“The government has proposed to extend the date of incorporation for income tax benefits to startups by a year from March 31, 2023 to March 31, 2024. The budget further proposed to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years. This extension to the startup tax holiday policy will boost the entire startup ecosystem of the country.”

Vandita Purohit, Founder, Mauji Cafe

It’s great that this budget has a contingency plan for the hospitality sector which was much needed. But there is still a lack of awareness amongst hospitality startups with respect to how to access this for the larger benefit of the hospitality ecosystem and our economy. We appreciate this step taken by the govt of refunding 95% if the MSME startup fails, but this can also have a lot of unforeseen drawbacks for the last mile startups.

Aditya Balani, co-founder, LetsDressUp 

The budget has been well-balanced overall, but some concerns still haven’t been addressed for Startups like us. One of the key concerns for Startups like us is the inverted tax structure. We pay ~18% input tax but get only ~5% output tax. This creates a net input of over 10% which is not credited to us immediately as cash, thus leading to working capital issues.

Secondly, the taxation on startup investments is significantly larger than on investments in public markets. It will really help the startup ecosystem if there is parity between the systems.

India is a market with potential for disruption and innovation as there is an extensive reservoir of youngsters who would like to explore the path of entrepreneurship. Ease of business and ironing out these concerns will fast-track our economy and industry toward growth.

Jeevika Tyagi, co-founder and chief executive officer, Aastey Designs 

The startup ecosystem has been a growth driver for India’s GDP for the past couple of years. The government has been promoting the launch of new startups as it is the key to becoming an Aatmanirbhar India. Although, with advancing years, the prices of clothes are on the rise yet the extension of date of incorporation for registered startups to avail income tax benefits will prove to be quite beneficial to the startups initiated for launch during 2023-2024. It will allow the new startups to appeal for a tax holiday and will ultimately lead to long-term financial gain.

Abhishek Gaggneja, founder, Yoga Brands 

The government has pledged to increase the availability of funding for MSMEs and provide support for the development of AI and data governance. These initiatives will help to create a more favorable environment for start-ups in India and enable them to grow and scale their businesses.

Harini Sivakumar, founder and chief executive officer, Earth Rhythm 

Union Budget 2023 is a step towards the development of India’s startup ecosystem. There have been some encouraging announcements, such as extension of the carry forward of losses on change of shareholding of startups from 7 to 10 years of incorporation and the establishment of the National Data Governance Policy that will enable access to anonymised data to startups in a bid to boost development.

The finance minister also announced simplification and rationalisation of provisions to streamline compliance and promote ease of doing business, another encouraging move that will make the startup ecosystem more favourable. But I believe that in a bid to strengthen startups, more emphasis still needs to be given to R&D, which I think is not happening right now. The government could also support D2C brands with their own manufacturing units with special manufacturing zones. Sector-specific clusters or parks with modern infrastructure would also help.



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