Finance Minister Nirmala Sitharaman will present her seventh Union Budget on Tuesday morning after retaining the cabinet position for a second consecutive term.
If the government were to deliver on its promise of driving Indian economy towards becoming the third largest by the turn of this decade, consumer and retail sector will have to chip in with a crucial contribution.
Retail accounts for more than 10 per cent of India’s GDP and the Direct-to-Customer (D2C) route has increasingly become favourable for new brands in the consumer and retail space. India's D2C market is expected to reach $61 billion by 2027, growing at an expected CAGR of 38 per cent.
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However, the D2C sector expects the government to help alleviate some of its problems related to funding, taxation and ease of doing business.
Homegrown brands betting on the Union government’s ‘Atmanirbhar Bharat’ call and building their R&D prowess ask the government to foster an inducive environment.
“Incentivizing domestic production through tax breaks, subsidies, and R&D funding will enhance India's manufacturing capabilities,” said Amit Khatri, co-founder of Noise, a smart wearable company.
He also expected the government to channel more funds to encourage R&D efforts being taken by the indigenous brands.
"India's path to 'Viksit Bharat' hinges on nurturing technology breakthroughs through deep tech entrepreneurship. The new government (must) establish a strong regulatory framework to support the startup ecosystem and ensure efficient fund allocation to encourage strategic R&D efforts,” added Khatri.
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Others pointed out that the government needs to bring interventions to ease the burden of taxation and simplify business operations.
“The landscape for D2C entrepreneurs is marked by formidable challenges, particularly in navigating compliance intricacies such as GST, equalisation levy, TDS, TCS, PF-ESI, and fundraising regulations including the draconian angel tax,” said Priyanka Duggal, Partner, Grant Thornton Bharat.
Simplifying these processes will significantly alleviate operational burdens and cultivate a more hospitable environment for startups and MSMEs, Duggal said.
Industry watchers also asked for reconsideration of the Angel Tax exemption and extending it to investors as well. India currently exempts startups from paying Angel Tax in specified scenarios where the aggregate amount of paid-up share capital and share premium, of a DPIIT-recognised startup, after the proposed issue of shares, if any, does not exceed Rs 25 crore.
As per the Income Tax Act, angel tax is the tax payable by unlisted companies that have raised investment valued above the fair market value by treating it as income.
However, from an investor funding perspective, no specific exemptions are currently available for MSMEs from angel tax applicability. “To boost growth of MSMEs looking for funding, perhaps, a similar exemption may be introduced to foster growth and technological advancement,” said Duggal.
Besides taxation, the industry also expects more clarity around the regulations concerning the sector.
India currently does not have a single, unified e-commerce policy. However, there are existing regulations in various acts that govern the e-commerce sector in India.
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“These include the Foreign Direct Investment (FDI) policy, the Consumer Protection Act of 2019, the Information Technology Act of 2000, and the Competition Act of 2002. There are multifaceted regulatory compliances attached to the same, depending upon the nature of operations, which perhaps need some streamlining,” Duggal added.
