Startups call for incentives in R&D & innovation; chip-building capabilities for auto sector

New Delhi, Jan 24: Ahead of Union Budget 2022, incentivizing  research and development and innovation centers, support for chip building capabilities, sops for electric vehicles have emerged as priority in Budget expectations of the start-up sector and the automobile industry. With the pandemic acting as a catalyst for technology adoption and driving the need to understand how the technology sector can develop through Government supported incentives and upskilling, provision for relaxed regulations to attract tech start-ups for listing in India has emerged as a top demand of start-ups, a Grant Thornton Bharat’s pre-budget survey shows. Increased focus on reforming the academic ecosystem for enhanced skilled digital talent, access to capital and a framework and regulations for direct overseas listing for Indian tech companies are among the key areas of interest for a sizeable section of respondents in the survey. The start-up industry also hopes the Budget will focus on reform in higher education curriculum and enhanced academia to create a globally leading skilled digital and tech workforce, according to Grant Thornton Bharat. President, CII, TV Narendran, has in the industry wish list, pointed out that as start-ups have emerged as a conduit for entrepreneurship and innovation, to attract domestic investments into start-ups, government should consider reducing the percentage of long term capital gains LTCG) from 20% to 10% and abolish the surcharge on investments made into start-ups by investment vehicles. According to CII, the process of issuing income tax refunds to start-ups should be accelerated and the tax on capital gains arising on exit should be relaxed as a key move in attracting funds into the start-up sector,. “2021 saw the rise of 44 Indian unicorns. With many unicorns poised to go public over the next 5 years, the Union Budget 2022 should create a level playing field for domestic and foreign investors and simplify the overseas listing process,” says Rahul Goel, VP Finance, Moglix. According to Goel, startups need greater clarity on the input tax credit model of the GST for working capital efficiencies. The Budget should rationalize the existing surcharges on LTCG and short term capital gains (STCG) taxes. “It should consider extended tax exemptions for sunrise and essential categories like e-learning and packaging and ESOPs should be treated as LTCG for taxation, considering the holding period,” adds Goel. In the automobile industry, there are mounting expectations from the Government to offer aid in domestic chip building capabilities and to focus on improving automotive research and development base in India in the Budget, says another Grant Thornton Bharat survey on the automotive sector. “Government support via Budget 2022 is critical given the disruptions that the sector is experiencing due to the pandemic as well as the advent of new technologies around electric mobility and regulatory changes,” says Saket Mehra, Partner and Auto Sector leader. With consumer interest in EVs growing, there is also concern about a general lack of charging infrastructure, points out Suhas Rajkumar, CEO & Founder, Simple Energy, a Bangalore-based EV and clean energy start-up. “From Budget, we expect more relief to younger, more ambitious players in the EV vertical like us since we have been hit by rising prices of the components and semiconductor shortage. The Budget should encourage the collaboration of EV players and divert more funds towards the government’s clean fuel vision,” adds Rajkumar. A resounding 84% in the Grant Thornton Bharat survey also expects to have further direct exemptions and incentives to foster sales of EVs and on providing EV purchase incentives, 16% want it in the form of purchase subsidy, 46% seek tax exemptions, 11% want access to financing and 27% scrapping and retrofit incentives.