Budget 2016: From GST bill passage to encouraging digital payments, here's what fintech start-ups want

Prime Minister Narendra Modi unveiled the much-awaited 'Startup India action plan' on January 16, with a slew of incentives to boost start-up businesses -- offering them a three-year tax holiday and an inspector raj-free regime, capital gains tax exemption and Rs a 10,000-crore corpus to fund them.

The 15,000-plus strong Indian start up community is now looking towards Budget 2016 for an easy tax regime, relaxation in investment norms and more incentives for innovation.

Along with the Startup India plan, Modi's pet visionary project 'Digital India' has raised the bar for entrepreneurs to explore the digital sector. One major chunk of these start-ups deal with financial technolgoy or fintech, as it's called, to make digital payments and payments via smartphones simple and accessible. 

Given that these initiatives are in line with the government's plans to push digital payments to bring money under the taxman's scanner and limiting the flow of black money in the system, a lot of fintech start-ups are keenly eyeing the Budget, the third one by Finance Minister Arun Jaitley. 

Here's what some of them told dna in a series of emails.

1. Passage of GST bill: Siddharth Arora, CEO & co-founder of ePaisa, says, "All eyes are on GST, as this will be a critical requirement for transformative tax reforms. A large chunk of taxpayers do not use automated systems for billing, inventory management, invoicing, etc. Innovative solutions that are cloud- and mobile-based and have lower cost overheads will be beneficial in bringing these e-disconnected tax payers online.

Similarly, Zubin Jagtiani, COO & co-founder of Think 7, reiterated Arora, while saying, "Introduce GST at the earliest. As a startup dealing in both software and hardware, we have to deal with multiple levels of taxes which distracts from us from focusing on the product and R&D." 

Apart from this, Jagtiani, whose company deals with software products for automotive manufacturers, also said. "Give a boost to the auto industry by relaxing excise duty norms and reducing interest rates. Focusing on infrastructure will boost the commercial vehicle segment which will have a trickle down effect on the entire economy."

2. Digital India: "The Modi-led government has announced reforms like Digital India, and is taking steps along with the RBI towards creating a cashless economy. To ensure that we move towards being a digital economy, the government must announce tax incentives for consumers and merchants for their digital transactions", continued e-Paisa's Arora.

Similarly, Naveen Surya, Managing Director, ItzCash Card said, "The usage of digital money needs to be endorsed through several measures.”

He said, "It will be critical that prepaid instrument issuance be brought under the financial inclusion targets of the banks and also incentivise them to accelerate financial inclusion in the country. This would usher in universal acceptance, thereby encrypting the digital model seamlessly within the ecosystem which can then be viewed as a huge game-changer for the entire economy”.

“A large chunk of taxpayers do not use automated systems for billing, inventory management,  invoicing, etc. Innovative solutions that are cloud and mobile based and has lower cost overheads will be beneficial in bringing these e-disconnected tax payers online,” e-Paisa’s Arora said. 

3. Digital Payments: Anand Ramachandran, CFO of TechProcess, said "E-payments taking over paper payments for the first time in India. So, reduce tax incentives for merchants who accept online payments".

"The usage of digital money needs to be endorsed through several measures. ‘Incentives to all’ would be a welcome approach to begin with, like an introduction of a rebate on expenses for transactions undertaken digitally, or a tax benefit to the end consumer among others", said ItzCash Card’s Surya.ItzCash Card’s Surya.

Moreover, Jagtiani said, "permit recurring online payment for SaaS companies. Currently, the criteria for companies who can enable recurring payment is very stringent and most startups do not qualify".

4. POS Terminal: "mPOS (Mobile phones as Point Of Sale) are the solution if POS machines are not available. This can make the one million POS units increase to 225 million POS units in India", said TechProcess’ Ramachandran.

"Even subsidising import duty levied on a POS terminal which actually forms a part of the digital infrastructure would indirectly benefit the system", said ItzCash Card’s Surya.

5. Tax: "Impose tax on cash withdrawals more than Rs 50,000 a month", said TechProcess’ Ramachandran.

Moreover, e-Paisa's Arora says, "At retail outlets or through online shopping over 40% of the consumers still prefer making payments through cash. For service providers that are enabling the solutions to ensure that even the smaller kirana stores are equipped to accept digital payments, the government must exempt them from direct and indirect taxes as the margins on which they operate are very thin.”

"To ensure that we move towards being a digital economy the government must announce tax incentives for consumers and merchants for their digital transactions,” he added.

6. Policy: Further, he said, "The policies pertaining to the digital payments need to be unified at the macro level within the government as well as the financial services sector so that more and more things are aligned centrally such that a customer who undertakes a digital transaction is not restricted to any industry standardization. This in turn would not only help reduce duplication of efforts but also allocate a national recognition to the digital infrastructure thus attracting more takers to the digital model driving the digital India mandate with a new fervor".