Address regulatory, tax challenges for startups & SMEs: Nasscom


nasscomIT industry body Nasscom today said the government needs to address regulatory and tax challenges for technology start-ups and SMEs, which are driving a new phase of growth for the over USD 100 billion sector.

As part of its budget recommendations, the industry body also highlighted that joint cooperation is needed between the government and industry to facilitate adoption and migration towards a digital economy.

"The emergence of a rapidly growing ecosystem for innovation; driven by young, tech savvy entrepreneurs is a powerful new complement to the existing global reach of the industry," Nasscom said in a statement.


It added that the small and medium enterprises (SMEs) and technology start-ups need an environment of constant nurturing including access to funds, incentives to support operations and a simplified compliance framework.

Also, large enterprises require stable policies and predictable regulations to continue its global journey.

"The government has been progressive and has committed to adopt technology for governance. With enabling policies and speedy implementation, we can surely realise the Digital India vision," Nasscom President R Chandrashekhar said.


The success of initiatives like Digital India and Make in India not only offer tremendous opportunities for innovation driven technology industry, but success also hinges on the sustainability and continued growth of the sector, he added.

"Hence, factors that can potentially restrict growth and innovation need to be addressed," he said.

Nasscom has suggested that issues like difficulties in access to funding for low asset based firms, investor difficulties related to regulations and taxations, ambiguous Software product taxation and incentivisation of technology start-ups and SMEs is looked at.


"Provisions on deduction for employment and skill development (Section 80JJAA) should be extended; provisions like offsetting manpower training cost, deferred tax credits for start-ups be offered; and interest rates on penalty for service tax, for amount under litigation, should be rationalised," it said.

To encourage growth of ecommerce, taxation on digital transactions should be in the least, at par with the physical world, if not reduced to facilitate adoption and migration to technology enabled platforms, it said.

"This will help government leverage the inherent transparency and traceability of online transactions," it added.


Nasscom urged that incentives are extended for adoption and implementation of IT tools for efficiency enhancement, ensuring sustainability and global competitiveness for the success of the Make in India programme.

For growing domestic business, Nasscom has suggested that royalty definition are aligned with international practices, POPS rules are clarified, amendments made in CENVAT rules are revisited and TDS rates on technical services fee is lowered.

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