The Finance Minister today announced a series of changes which could help the whole startup ecosystem take a better shape. Good to know that Govt of India has started reckoning the MSME & Startup space as a major force now.
Here are few changes which impacts the startup space in a positive manner
Expenditure on Technology Incubators to be part of mandatory CSR
- Technology incubators located with academic campus have been recognized to offer commendable support to Startups. Many of us are already aware of the mandatory 2% spending by Corporate on various CSR (Corporate Social Responsibility) initiatives. The FM has now included these incubators in the list of allowed CSR expense. This will surely help and give a major boost to the incubators as it opens a wide array of funding sources for them. Something to really cheer about by the startups.
MSME Benefits to continue for 3 years post MSME stage
- FM has proposed to extend all of non-tax benefits and preferences applicable to MSME sector, once they grow beyond the MSME category for a period of 3 years to help them grow at a faster and rapid pace and also not be afraid of loosing these benefits during the transition phase.
Angel Funds to be given “pass thru” in taxation by SEBI
- SEBI shall introduce guidelines to register Angel funds as Category I Alternate Investment Funds. This means that Angel funds can also avail benefits of pass thru taxation proposed for AIF. This is a major step to boost Angel Investments in the country.
Listing at SME Exchange
- Startups & MSMEs shall be able to list in SME exchanges without a need to go for IPO (Initial Public offering). The issue should however be restricted to informed investors. This saves smaller companies from making rigorous efforts in marketing and brand building which was crucial for raising money from a wider set of investors for the issue to be successful. Listing at SME exchange provides a higher amount of credibility and funds liquidity. Watch out for eLagaan Whiteboard Friday video on SME listing to be released shortly on NextBigWhat.
Service Tax regularization – Voluntary Compliance Encouragement Scheme
- This is a much needed bonus for lot of companies who have failed to comply with service tax filings. For the first time the Service tax department shall notify a “Voluntary Compliance Encouragement Scheme” where companies who have defaulted to pay their service tax and file appropriate returns can regularize their non-compliance without paying penalties and interest during the tenure of the scheme. This is a one-time scheme so get started to take advantage of this. Currently the service tax rules, specifies a penalty of upto Rs. 20,000 per return for delay in filing the returns. With this scheme, stratups are expected to save Lacs of Rupees depending on the extent of default and also make themselves compliant.
SIDBI gets more finance, Credit Guarantee Fund on the anvil
- Govt has allocated about Rs 10,000 crores more to support various schemes run by SIDBI and other MSME institutions to help support the sector. This also includes setting up a Credit Guarantee Fund for factoring.
Recommended read: Angel Investors To Qualify for Tax Pass Through, SMEs Can List on SME Exchange without IPO
[Edit Note: This is a guest post by eLagaan, a company which offers end to end CA, CS, Business legal & Payroll services for startups & growing companies.]