64% want Startup India’s benefits for those registered in past 5 years: Survey

New Delhi, Jan 16 (IANS) With the Startup India Action Plan completing a year, 64 per cent of start-ups surveyed said its benefits should be extended to all those registered in the last five years.

Most of these start-ups and entrepreneurs are unable to utilise many of these benefits as they only apply to those incorporated after April 1, according to a survey conducted by Citizen Engagement Platform LocalCircles.

The platform has been working with more than 1.2 million people with 30,000 entrepreneurs and start-ups among them, to prepare their wishlist from the government in 2017.

Start-ups also want the government to qualify start-ups that are less restrictive and reduce the involvement of incubators and inter-ministerial boards. They also said that they are subjected to tax notices and scrutiny exercises even if they don't have any income or revenue.

Many of them complained that start-up valuation is not a well understood subject for tax inspectors and leads to unnecessary questioning.

The survey also said, "due to the recent crunch in startup funding, many startups faced lower valuations".

"Some start-ups have seen tax demands for the assessment in the year 2013-14 and 2014-15 under Section 56(2)(vii)(b) of the Income-Tax Act, 1961," it said, adding: "While the section was actually introduced to curb money laundering, it is getting wrongly aimed at genuine investment in start-ups".

Another issue that has been raised by many entrepreneurs is about the newly introduced service tax notification by the Central Board of Excise and Customs.

As per the notification, Indian companies procuring IT services from overseas suppliers classified as Foreign OIDAR (online information and database access retrieval) vendors now require to pay service tax on foreign vendor invoices in India and register themselves for service tax and deposit it on behalf of their foreign vendors.

For many technology and consumer start-ups, most of the services are procured from foreign vendors as they are not available in India.

This will not only increase the cost of business for Indian start-ups but will also result in increased regulatory compliances as they will be on the receiving end of any scrutiny notices, according to the survey.

It also will make India-based startups less competitive in a global marketplace as many global tech startups that are headquartered and registered overseas do not have to face this tax liability.

As many as 63 per cent start-ups, SMEs and citizens suggested that start-ups with no revenues must be fully exempted from Service Tax.

Another demand was for government support on the ground.

A staggering 52 per cent start-ups/SMEs see corruption and inefficiency as the biggest challenges for their business and 58 per cent want the government to facilitate reduction in state and local bottlenecks faced on the ground.