The setting up of a 1000 cr start up fund created through SETU entrepreneurial innovative fund is a welcome initiative. While the initiative is commendable, the effective implementation of the same needs to be ensured to make the fund a success. Consolidating startup approvals through ebiz portal by including state approvals would certainly bring down the complexities in setting up business. With more and more states participating in this initiative, this portal would eventually act as a single place window for obtaining regulatory approvals and licenses. If implemented, this would be the single most important development to improve the ease of doing business in India.
The present legal and regulatory framework for business is not only complex but also impractical in many circumstances given the change in business environment. Amending or repealing outdated laws and regulations is the need of the hour if India hopes to climb up the ease of doing business index globally. The setting up of an expert committee to review the pre existing regulations is an extremely imperative and positive step in the right direction.
The proposal to have a plug and play model for even smaller businesses by replacing dated laws with procedures would not only move many of the India centric businesses located outside India back to India but also increase interest in setting up newer businesses. This would however become a reality in the next few years and is not an immediate proposal.
The postponement of GAAR provisions by 2 years would improve the ease of investment climate in startups and making it applicable prospectively is a serious incentive in the right direction. GAAR provisions in the present form are regarded as draconian by the investor community and deferment with a possible revisit to the provisions making them practical, would certainly boost investment climate.
Reducing the tax and withholding rates from 25% to 10% is a hugely positive step. The effective reduction is taxation is more than 22% given the fact that most of the technology agreements are “net of tax” transactions. This amendment makes cost of technology a lot more accessible and affordable to the Indian start-ups and businesses.
Reduction of corporate tax from 30% to 25% over a period of 4 years would bring India at par with many of the attractive business destinations of the world. Currently the average corporate tax rate is around 23%. However with gradual phasing out of exemptions, the overall change is taxation position seems marginal. The positive takeaway is the possibility of reduced litigation owing to taxation exemptions.