India Regulatory Brief: Tax Exemptions for Startups, Further E-Commerce Regulations

February 9, 2015 Posted by India Briefing Reading Time: 4 minutes

Center Plans Tax Exemptions for Startups

The Indian government is devising an incentive scheme for startups which proposes exemptions from service tax and excise duties.

If passed, certified startups registered under the department of science and technology (DST) will be eligible for tax exemptions until their revenues reach a certain threshold. In addition, certified startups will receive grants of up to US$1.6 million (Rs 10 crore) from the DST.

The reform push is good news for investors looking to join India’s expanding tech and startup industry. Last year venture capitalists nearly doubled their investment in the country, injecting a record breaking US$2.1 billion into Indian startups.

E-Commerce Industry to see Further Regulation

India’s e-commerce industry may be facing extensive regulation as the government considers a proposal submitted by the Ministry of Consumer Affairs.

The proposal highlights an imbalance between the licensing, regulatory and administrative burdens of online and offline retailers. The Ministry proposes to level the playing field by allocating e-commerce activities to various ministries and departments. Consequently, the sector may soon be governed by regulations from as many as nine ministries.

While online retailers may suffer from the increased regulatory burden, money continues to pour into the sector, with its market value reaching US$16 billion at the end of 2013.

RELATED: Is India’s E-Commerce Industry too Regulated for FDI?

India to Implement Regulations to Support Insurance Ordinance

The Insurance Regulatory and Development and Authority of India (IRDAI) are set to implement several new regulations in support of the Insurance Laws (Amendment) Ordinance.

Around 40 regulations will undergo changes or be superseded in the coming months, according to IRDAI Chairman T S Vijayan. In the short term, foreign invested enterprises can expect increased freedom to appoint agents and new regulations on expense management.

Last year, the foreign direct investment (FDI) cap in the insurance sector was raised to 49 percent. The increased investment cap, in conjunction with the new regulatory framework, will help facilitate further investment in the sector.

Rajasthan: Power Tariff Hike on the Horizon

The Rajasthan state government has reneged on an election promise and committed to an annual hike in energy tariffs – including for industrial consumers.

The power department has proposed hikes in both fixed and energy tariffs for domestic, non-domestic and industrial consumers, which are likely to be confirmed later this month. The proposal merges the slabs in the domestic sector to reduce the number of slabs to four and is expected to provide an additional US$318.8 million (Rs 1,969.40 crore) in revenue.

While small incentives have also been suggested (0.15 percent rebate on prompt payment), the new regime will undoubtedly impact the bottom line of power hungry industries in Rajasthan.

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