Startups seek tax breaks available to manufacturing sector

MUMBAI: Startups are looking for tax incentives for the sector in the upcoming budget. The industry, for one, is vying for similar benefits that have been extended to the manufacturing sector.

“Manufacturing companies are benefiting from lower tax rates to boost their ‘Make in India’ activities. Similar tax incentives should be considered for startups, especially those working towards strengthening the Digital India initiative. Startups are investing heavily in R&D and technology infrastructure. Incentives such as weighted tax deductions and subsidies on R&D employee costs would go a long way in promoting R&D activities in the startup ecosystem and create more employment opportunities,” said Arpit Chug, CFO, Razorpay.

Easing the tax treatment of ESOP (employee stock ownership plan) for startups would go a long way in helping companies retain talent, said Mayank Kumar, co-founder and managing director at UpGrad. “While ESOPS are a good wealth creation tool, the tax rates are very high and that doesn’t make them an attractive proposition for many employees,” said Kumar.

Reducing ESOP-related taxes, which can currently be as high as around 40%, will encourage more qualified professionals to join startups, said Dhiresh Bansal, CFO at Meesho. Simplifying tax compliance processes and lowering tax rates for startups, at least in the initial years of operation, will ease their financial burden, Bansal added.

Gaming startups, which have been hit hard by the higher GST rate, are looking to the government for tax clarity in the Budget. “We have been urging the government to impose GST on gross gaming revenue/platform fees, which is the actual revenue received by the platform. This approach will ensure the profitability of the sector and promote growth,” said Paavan Nanda, Co-founder, WinZO. The startups are also looking for clarity on angel tax.