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3 GREAT STARTUP TAKEAWAYS 2016 BUDGET MUST BRING

January 24, 2022by admin0

After the landmark ‘Startup India Plan’ got a good reception from entrepreneurs, more benefits are expected to come  to startups this budget season. So, we’ve compiled a list of startup takeaways 2016 budget must bring.

Minister of Finance is expected to do away with certain outdated rules related to business taxation. These amendments will benefit Startups with the big investment in brand building. Like e-commerce, app makers, other new generation digital players.

The Industry is expecting the Finance Minister to come up with startup takeaways  such as:

Allowing appropriation of initial startup Branding Expenses over several years to facilitate simplified accounting. These will let e-commerce companies and startups capitalize on the initial Advertisement, Marketing, and Sales Promotion (AMP) expenses.

A follow up to Startup India Action Plan, wherein more startup-tax cuts and encouraging announcements are expected.

E-commerce companies may be given a withholding tax relief. It frees more revenues, given that companies have to keep 10% of payments received as withholding tax. Early stage e-commerce companies often make losses. So, the payment amounts withheld could be later on claimed as tax refunds but this creates short-term cash flow problems.

Industry reaction:

Rakesh Nangia, Managing Partner, Nangia & Co believes “E-commerce sector is still grappling with outdated laws not flexible enough to adjust to  their requirements. This sector, unlike the conventional business models, does not need to invest much in the tangible assets like plant and machinery. Its assets are generally intangible in nature, like the value of its Brand.”

Amarjeet Singh, KPMG (India) Partner Tax, says that “The Ads Marketing Sales Promotion expenses are very important for e-commerce companies to acquire new customers. A major part of this expenses is intangible and the government should allow identified category of AMP expenses to be capitalized.”

Legalsyne Take:

These measures are supposed to induce energy in e-commerce sector which is facing record losses now. We feel that e-commerce industry can support itself if it moves away from the deeply discounted model.

Though, tax cuts to Startup AMP expenses is a welcoming step which was really overdue.

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