What the tech industry expects from the Union Budget 2020-21?

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Mumbai: As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2020-21, here are some of expectations from the tech industry.

Dipesh Kaura, General Manager – Kaspersky (South Asia)
“This year’s Union Budget is crucial across businesses in India. While we have seen a steady increase in the cybersecurity budgets globally, we are expecting the same in India too this year. India in recent years has shown growth in its initiative to become a digital nation and we can see the government increasing cybersecurity awareness in the country. As an industry, we are hoping that this is reflected by the government in their new budget as well.”

“Proper investment in critical infrastructure cybersecurity will only accelerate the nation’s digital transformation. Funds also should be focused on supporting skill development & training of aspiring students who aim to become cybersecurity professionals, as well as for the government and already existing large enterprise employees to fight the evolving cyberthreats. Cybersecurity Awareness campaigns for general consumers should also be a major focus of the budget.”

Dr. Vivek G Mendonsa, Director- Sales, Lynx-Lawrence & Mayo
“With the growing need for infrastructure development, the industry demands an appreciable part of the Union Budget 2020 to be watchful towards supplying advanced tech-based infra solutions. While the government has spoken on certain concepts, like the Smart City projects, which were launched initially at 30 cities and scaled up to 100 Smart Cities. Digital India and housing for all, these still need to materialize. Hence, the necessity of the government taking concrete measures in advanced engineering is a must need for developing the sector. We certainly hope that the government looks at opening up the infrastructure sector. Steps, like incentivizing the SME sector and providing additional financial flexibility, would certainly play a crucial role in benefitting the sector. “

Trishneet Arora, Founder & CEO – TAC Security
“India’s rapid digitisation trajectory is expected to further accelerate with the upcoming 5G deployment. However, while the 5G rollout will no doubt improve network latency issues and facilitate high-speed interconnectivity, it will also give rise to many pressing cybersecurity challenges. As the number of connected devices increases exponentially, threat actors will have more potential entry points that they can use to exploit and compromise enterprise devices, networks, and data at scale. This will make real-time visibility into network cybersecurity health and vulnerability exposure a non-negotiable requirement for enterprises across the country.”

“With this in mind, I feel that the government should prioritise promoting indigenous cybersecurity players in the vulnerability management space in the upcoming budget. Doing so will ensure that Indian organisations across industries have access to cutting-edge cybersecurity products and services that can streamline and strengthen their security profiles to make them ready for the digital age. It will also incentivise Indian cybersecurity companies to develop globally-defensible IPs that can add more momentum to the worldwide war on cybercrime.”

Sanjay Goyal, Business Head – TimesJobs & TechGig
“Last year established the adoption of new-age technologies like AI, Cloud computing, Machine learning and more. The dearth of the skilled workforce was the key factor in the slow transition and acquisition of change. On job training and promotion of certain courses on educational level should be a key focus in 2020. Also, the government needs to level up more on the employability of the available workforce through investments in relevant skill/vocational training.”

Arun Nathani, CEO & MD – Cybage Software
“The Government of India has taken steps in the right direction to address the economic downturn by slashing the corporate tax rates benefitting the software industry and companies like Cybage. As part of Union Budget 2020, a combined step taken towards corporate tax and a roll back of DDT across board will bring in FDI and incentivize the industries to ramp up the capex/opex spend once the demand is back. Rationalizing the GST rates and compliance processes will outgrow the consumption rates. The Indian IT industry will welcome specific incentives like weighted deductions for investing in R&D of AI/BI technology tools to facilitate IT companies, Universities and Research Institutes.”

Deepak Kagliwal, Director & Head, Sales and Marketing – Blazeclan Technologies
“We believe that empowering businesses by introducing business-friendly policies and tax reformation will help drive growth and development for the country. The proposition of providing Rs 500 crore to micro, small and medium enterprises (MSMEs) by the committee appointed by RBI is one such effort if implemented will enable businesses to effectively operate with ease. Technology, as a sector has a potential to be the strong arm of Indian economy, hence the government should invest more towards building indigenous technology solution, along with defined regulations to foster growth. We at Blazeclan Technologies, are optimistic about the upcoming announcement and wish to support the government in our capacity to make India, a digitally first nation.”

Arihant Jain, Co-founder and CEO – Seekify
“The country is pinning a lot of expectations with the 2020 budget. I’d like to see tangible efforts with strict timelines on making it easier to do business in India. This will benefit startups, SMEs and attract more companies to come or invest in India. For instance, there are so many requirements for compliance and regulatory in India (Labour law, Companies act etc) yet there is not a single comprehensive list or way to know what compliance a company needs to adhere to. I belong to a startup community, we all want to be compliant with all requirements but it seems almost impossible for us in such a scenario. These are just a few simple things that are a deterrent to anyone wanting to do business in India.

“On a macro level, benefit programs need to be introduced for small or medium-sized companies that will help them to invest in Innovation and grow exponentially. Also, we need policies for setting a robust digital ecosystem for budding entrepreneurs to scale up their ideas. India has the potential talent to make the year count and the youth of the nation should get relief in the form of economic reforms.”

Mihir Mohan, CEO & Founder, Pitstop
“The Indian automotive industry is hoping for some short-term measures for demand activation as the market slows down. Extending the adoption deadline for BS6 regulations as well as relaxation in custom duties and GST on automotive parts will help create demand in the industry. Green mobility adoption can be given a boost by scrapping import duty on Li-ion cells, which will also reduce the costs of EVs. Introducing the incentive-based scrappage policy will push old vehicles manufactured between 1995 and 2005 off the road, while at the same time give some relief to the buyers by reducing GST, road tax and RTO charges.”

“Demand growth will ensure that the wheels keep turning in the years to come by fuelling consumption in the market. Strong macroeconomic headwinds are leading to subdued consumer interest and can be countered by the government, which we are hoping to see this year.”

Swathi Bavanaka, Co-founder & COO – Evibe.in
“For the year 2020, we are optimistic that the Union Budget will renew focus on startups and the fiscal impetus they need. Last budget missed the mark when it comes to major inclusions for the technology startup sector, we are optimistically looking forward to a course correction this year. As India is becoming a hub for home grown start-ups, it would be great if the Government can take this up as a priority area in the budget, allocate more funds and announce policies that would encourage the startup sector. This will help create a more welcoming ecosystem for the industry players and catalyze innovation.”

Dr. Ranjit Nair (PhD AI), CEO and Founder – Germin8
“One of the biggest areas where countries are vying for dominance is Artificial Intelligence, which is expected to have a huge impact not only in commerce but also in areas like health, national security, cybersecurity, food security, education, and global warming. Unfortunately, countries like USA and China are leaving India behind in terms of AI research, AI entrepreneurship and government investment in AI.”

The following are some things that the government could do:

  1. AI Grand Challenges: The government can announce AI grand challenges that are open to teams from academia and industry that involve solves an important problem for India. The government’s role in this would be to give a crisp problem definition, provide access to the data and of course provide a good cash prize. Such AI grand challenges will result in important problems getting solved,  new startups and jobs, and capture the nation’s imagination and give an impetus to the field of AI.
  2. Make it easier to access capital: One of the biggest challenges that startups face is early-stage funding. The government could announce a fund on the likes of Singapore’s Temasek that will invest only in early-stage Indian AI startups. Also, the government could announce lower long term capital gain’s tax for investing in AI-based startups. This will encourage more angel investment into AI start-ups.
  3. Improve AI talent in the country: While there are a lot of engineers being produced in India, we still lag behind other countries in terms of the number of AI PhDs and AI research. The government should make more research grants available for AI research and should also offer incentives to institutes that invest in AI training.
  4. Ease of doing Business: Government focus should be on bringing policies that encourage AI companies. There should be less red tape, more freedom from the government departments so that entrepreneurs can be focused on building solutions without unnecessary distractions.

The Union Budget 2020-21 expects to consider several far reaching economic and fiscal measures to give a boost and fillip to India’s economic growth. KPMG in India’s Pre-Budget survey conducted in January 2020 has tried to capture expectations of important stakeholders on key tax aspects of the budget. Over 215 respondents across sectors participated in the survey.

Below are some of the key highlights:

The year 2019 saw the government implement significant tax cuts for domestic companies (to 22 percent) and for newly setup manufacturing companies (to 15 per cent) subject to their giving up available incentives and deductions. More than half the respondents to the survey plan to opt for the lower tax regime of 22 percent by giving up available incentives from FY 2019-20. A majority of respondents also believe that the rate of tax for foreign companies, should also be reduced in light of tax cuts for domestic companies.

A further stimulus by way of personal tax cuts is also anticipated. A majority of respondents anticipate that the basic exemption limit of Rs 2.5 lakh for individuals will be increased. Respondents also expect the finance minister to increase the income limit at which the maximum marginal rate of 30 percent kicks in. If implemented, this can help spur consumer demand by complementing the interest rate cuts delivered since last year

A majority of respondents also believe that the finance minister will not introduce Inheritance Tax. This is in line with the overall expectation, that there exists a need to provide a fiscal stimulus by reducing taxes on individuals.

About 50 per cent of the respondents expect the tax holiday for exports available to SEZ (Special Economic Zone) units to be extended to units set up beyond 31 March 2020.

Dispute resolution continues to be an area of concern among respondents. Almost half the respondents believe that the approach of the revenue authorities in dealing with international taxation issues are not in line with international norms. While Dispute Resolution Panel (DRP) is indeed a fast track mechanism intended to address international tax and transfer pricing disputes, it clearly emerges  from the responses that almost half of the respondents believe that DRP mechanism is not meeting its objective of resolving disputes amicably.

Just under 50 per cent of respondents believe that provisions dealing with the place of supply of R&D, testing  services and other performance- based services under GST are detrimental to the export of services. Since persons in India who render such services to customers outside India also contribute foreign exchange for the country, the exclusion of such services from the ambit of export of services is seen by respondents as affecting exports.

Hitesh D. Gajaria, Partner and Co -Head, Tax, KPMG in India
“Our Pre-Budget Survey indicates that rate cuts for individuals is the most wanted item for everyone. This is in line with expectations that lower tax rates for individuals, along with the corporate tax rate cuts enacted last year, will boost spending and investment in the economy. Corporates are also hopeful of extension of Tax Holidays for Exports to encourage more foreign inward remittances and continuing the weighted deduction for R&D spends to encourage Make in India. Introduction of e-assessment scheme last year to minimize the interface between taxpayers and the tax administration is seen as a welcome move, with many respondents believing that this will lead to greater transparency and efficiency. There is also felt a need to overhaul dispute resolution mechanism in direct tax laws, including therein provisions for negotiated settlements of tax disputes.”

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