Industry POV

Budget provides much-needed encouragement to Digital India and MSME companies

02 Feb 2017

Yesterday, Finance Minister Arun Jaitley presented the Union Budget 2017 amid hopes for renewed stimulus to spur economic growth. The digital marketing sector in particular was hoping for cuts in service tax on digital advertising and clarifications on the soon to be rolled out GST.

The tax levy on digital advertising was seen by the industry as one that curbs the growth of start-ups in the sector and unfair – no service tax is levied on print advertising. This widely unpopular levy was not cut or changed in the 2017 Budget. Despite the let down in that aspect, experts from the industry say that the budget has a lot to offer in terms of promoting the digital medium and driving economic growth in the country.

Vivek Bhargava, CEO, DAN Performance Group, said that overall the budget is good and an extremely positive one for the digital industry. “The strong focus on promoting a digital economy through various initiatives on the digital payments front will give a great impetus to the digital revolution that the country is currently undergoing. We are witnessing a significant increase in digital transactions owing to the cashless movement already, which is a huge indication of the times to come – largely in the benefit of the common man.”

“It’s encouraging to see the government introduce movements like ‘Digi-gaav’ and others which will take digital technology to the rural areas where most of the country’s population is actually based. This aggressive digital push is sure to contribute substantially in making India one of the fastest growing economies in 2017,” he said.

Speaking about the roll out of the GST, he said, “The industry is gearing up for a new tax law in the form of GST in 2017 – where in rates may not be lower than current tax. Hence, a rate cut currently won’t have too much of an impact on the digital marketing industry. Rates may go up under the GST tax rule, but set off of tax will be available to clients under both the current and GST regimes.”

Rajiv Dingra, Founder & CEO, WAT Consult, also felt that the budget has positive tone to it. “The reduction of personal tax gives more disposable income in hands of consumers. The reduction of corporate tax for MSME ensures more spends in hands of MSME corporates who largely use digital to promote their services. Incentivisation to go cashless and digital reduction of duties on POS systems will give a boost to use of credit and debit cards, which is great,” he said.

Dingra, who had earlier expressed his hopes for a cut in service tax on digital advertising, said that although the digital advertising industry is still under service tax and that continues to hamper growth of small publishers and agencies, the budget has delivered great news for Digital India as a whole.

Ahmed Naqvi, Co-founder and CEO, Gozoop, also agreed that the corporate tax reduction is good news for MSMEs such as Gozoop. “The push for transparency and digital is an added boost. I expect a major impact in the next round when GST will be implemented. The budget seems to be holding a fiscal deficit discipline. Overall, I would say the budget was a 7/10. My expectations from this crucial budget were a lot more,” he said.

The new tax laws have resonated with the common man and the industry alike. Zafar Rais, CEO, MindShift Interactive, said that the reforms in tax rules, especially the corporate tax structure, are a welcome tax relief to medium and small business after the effects of demonetisation. “The initiatives to encourage digital transactions have been maintained with an outlook on a digitised economy. Overall, the budget looks progressive though we are awaiting more clarifications on the GST implementation,” he said.