Indian startups urge govt to solve key issues like tax refunds, esops & more

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Indian startups have urged the government to intervene for solving issues ranging from faster tax refunds to altered rules around employee stock options. Local Circles, a community representing domestic startups, has highlighted these concerns in a letter to finance minister Nirmala Sitharaman. “Important actions to assist startups and small- and medium-sized businesses have been taken up in this budget, but there are still some open items that can be addressed through policy interventions by different arms of the Finance Ministry,” wrote Sachin Taparia, chairman and CEO of Local Circles in the letter. ET has reviewed a copy of the letter. The industry’s demands primarily revolve around solving issues of cash flow at startups and SMEs, while others look at more long-term interventions to boost e-commerce exports and promote the entry of more high-quality talent into startups. The letter outlines the issue of delayed processing of TDS refunds, saying many startups that filed their TDS in September last year have yet to receive refunds.

Local Circles has also suggested that measures such as processing of input tax credit refunds faster will free up locked cash as startups often face higher input credit and lower output tax. It also suggests that startups with a turnover below Rs 10 lakh should be exempt from GST under the Reverse Charge Mechanism for foreign vendor payments. Startups procure a lot of services from abroad but do not have enough GST output to offset the 18% GST cost, something they would not incur if incorporated outside the country. The letter also reiterates the need for government to boost e-commerce imports from India through interventions by the RBI, Customs, GST and India Post. At the same time, cross-border e-commerce imports need to be closely watched for misuse of ‘gift’ and other channels.  Local Circles has recommended a flat customs duty of 42.05% at the time of consumer payment rather than when the goods are received by customs.

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