Tuesday 12 January 2016

Exempt start-ups from service tax, e-commerce from VAT:

     Internet and mobile content service providers have sought exemption for startups from service tax for first three years.

They have also demanded exemption to e-commerce firms from VAT in states as they are already paying service tax.

"Startups have to pay huge amount over the first three years in way of service tax. It is not that they don't want to pay, but they have survival issues and this takes a back seat and penalties just make a struggling startup's life harder," the Internet and Mobile Association of India (IAMAI) said in a statement.

IAMAI represents internet and mobile content providers.

It recommends waiver of service tax for the first three years and incentives if startups pay their taxes on time.

The industry body said that the digital startup ecosystem in India should be systematically encouraged by focusing on specific fiscal interventions.
 It said that Angel Tax under Sec 56 (2) of the Income Tax Act has not been actually tailored to restrict funding of startups but it has put startups under the Income tax scanner, questioning the valuation by domestic individual investors.

"The criteria to qualify as an angel fund are stringent and need to be eased to support the startup ecosystem in the country. The association suggests that there should be tax breaks and incentives for individuals supporting startups with capital," IAMAI said.
 It said that there is need to streamline taxes for e-commerce companies. IAMAI said that e-commerce firms should be looked as market place and exempted from demand of VAT in states.

"The e-commerce marketplace industry is being subjected to onerous VAT demands from several states. They should be recognised as marketplaces and exempt from VAT demands in states. As market places they provide a service to online sellers and pay the service tax on that account," IAMAI said.

The industry body also urged government to facilitate policy environment to boost development of financial technologies like digital wallets, pre-paid instruments.

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