28 january, 2015 representation note for shri jayant sinha, mos finance, government of india
TRANSCRIPT
Our Vision: A $4 trillion economy by 2024Entrepreneurship will drive this economic growth
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"India is a $2-trillion economy today. Can we not dream of an India with a $20-trillion economy?” - Shri Narendra Modi
IVCA-TiE-IIC-IAN-NASE represent both capital and entrepreneurship; we have many overlapping goals and requirements
We are committed to building India’s entrepreneurial ecosystem and supporting “Make in India”, “Skills Mission”, “Smart Cities”, “Digital India”, “Swachh Bharat” etc.
We need support and encouragement, especially in many overlapping needs of our 5 associations:
– Tax pass through for impact investors (SVFs and AIFs)
– Amendment to the definition of long-term capital gain tax
– Official recognition of social enterprises and impact investors
– Development of infrastructure for incubators in partnership with private players
– Single window clearance for start-ups
– Access to well-developed industrial clusters for entrepreneurs
“The Indian economy is today a $2-trillion economy and we have also grown at 7-8 percent growth and we can double the economy to $4-trillion in ten years if we are able to regain that growth rate.” - Shri Jayant Sinha
“…India needs a shared vision to achieve 9-10 percent economic growth…” - Shri Arun Jaitley
Angel Investors, Venture Capitalists, Private Equity, Corporates, Entrepreneurs
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“Panel Member” on Committee for Social Impact Assessment
Extend Priority Sector Lending to Social Enterprises
Increase Access to ECB for Social Enterprises
Review Social Venture Fund (SVF) Guidelines
Tax Pass-through for Impact Investors (SVFs and AIFs)
Amendment to the definition of long-term capital gain tax
NASE, TIE & IIC
IIC & IVCA
IIC & NASE
IVCA, IAN & IIC
Our organisations are working together and have outlined several shared goals and asks from the government. We believe that by addressing these areas, the entrepreneurial ecosystem can be turbo-charged..
Here is what we need to achieve our shared goals.
Our Shared Vision: A Robust Entrepreneurial EcosystemWorking collectively to achieve our common goals
India Private Equity & Venture Capital Association
A Powerful Platform for Investment Funds to Interact with each other
Arvind MathurCEO, IVCA
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AIF, growth capital source to fuel PM’s “Make in India” visionWith US$80 billion; AIF’s have invested > 2 times IPO capital
IVCA promotes the development of venture capital and private equity industry in India and to support entrepreneurial activity and innovation.
Singapore becoming hub for Indian capital flows due to its clear globally acceptable tax regime
Indian skilled fund managers move their domicile, due to apprehension of adverse tax consequence
What can be done: Pass-through status for AIFs; no permanent establishment (PE) for offshore fund managers
Manage in India NOT Singapore
Income from securities transactions treated as capital gain for only FII; should be same for AIFs
Capital gain tax @ 10% for non-residents on unlisted securities; should be the same for securities of private limited companies
Clarification that income of AIF to be investment and non-business income like it is with FIIs
Need level playing field with FIIs to attract long-term AIFs
Clarity on GAAR
Safe harbor rules for advisory entity in India
Holding period of compulsory convertible instruments for purpose of capital gain
Tax on buyback of unlisted shares not aligned to DDT as a company which does not have distributable profit is also required to pay buyback tax, parity to be established
Remove ambiguity in tax laws
Impact Investors CouncilAiming to Build a Compelling and
Comprehensive India Impact Story
Mona KachhwahaDirector- Investments, CaspianBoard Member, IIC
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India can retain global leadership and exceed USD 1 billion in annual
impact investments by 2020, if we collectively galvanize the “impact
investment” ecosystem
1. Recognition of Impact Investors, Social Enterprises and IIC
5. “Panel Member” on Committee for Social Impact Assessment
3. Extend Priority Sector Lending to Social Enterprises
4. Increase Access to ECB for Social Enterprises
2. Review Social Venture Fund (SVF) Guidelines
Cumulative investment of over
US$1.6 billion across 300+ social
enterprises
Across high impact sectors -
financial inclusion, agribusiness,
healthcare, education, clean
energy, water & sanitation
6. Tax Pass through for Impact Investors (SVFs and AIFs)
7. Amendment to the definition of long term capital gain tax
07 08 09 10 11 12 13 14 20
92
286194210
298234235
480
1000
Annual Impact Investments in India (USD)
Impact Investors bear high-risk by funding enterprises serving low-income beneficiaries in remote geographies.
They can magnify impact if catalyse our ecosystem as follows:
IAN is the world’s largest Angel Group 350 members, 7 locations globally, 100 portfolio companies
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Angels are critical to start-up funding - In the US, annually, VCs invest $25 billion in 5,000 companies; Angels invest $26 billion in 50,000 companies
– Recognize Angel Investor groups as a specific category – proposed definition for such groups
– Allow angel Investor groups to make collective investments through LLP with a tax pass-through
– Provide tax credits to angels investing through recognized angel investor groups of 30% with a sunset provision that this benefit will expire in 5 years – the UK has 50%
Exempt Angel Investor groups from Section 56 (2) (viia) & (viib) which has the unintended consequence of taxing genuine angel investment
– If entrepreneurs cannot sell their shares at a premium to angels, they have to give away their companies!!!.
– Provision applies only to domestic investments and is discriminatory
Remove the new company law provision which requires any shareholder to buy at least INR 20,000 worth of shares at par
– Angel investors are happy to buy a fewer number of shares at a higher premium; this provision is against the founding entrepreneurs and makes for a more complicated structure
Leverage Angel Investors’ diligence to fast track grants/debts to investee companies under existing schemes
Treat Tax on Capital gains on investments by angel groups/VCs at par with investments in listed companies / mutual funds
AIF Category for Angel Funds- Remove 3 year restriction before exit – prevents start ups from raising needed capital from VCs, who want to buy out angels before investing
Remove RBI restriction on “ contingent payments” by foreign buyers – contingent payments common globally; this rule forces Indian companies to sell for less!!
Angel Group: > 2 years, <25 members, >15 investments; < 10Cr per investment,< 50Cr valuation
The Indus Entrepreneurs
Delhi-NCRCreating a Vibrant Entrepreneurial Ecosystem
Saurabh SrivastavaChairman Emeritus, TiE Delhi-NCR
Fostering entrepreneurship Through Awareness – Assistance – Advocacy
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Ease of Business
Regulations and process for setting up, operating, and exiting a business in India are time consuming and complex – Startups need single window clearance, access to well developed industrial clusters - STPI scheme transformed the Software Industry
Define start-ups as companies < 5 years old, <100 employees, < INR 25 crore revenues and allow them self certification – they have no resources to deal with multiple regulatory agencies
Ease of accessing govt. schemes and expanding the limit of grant schemes for innovators
Remove MAT provision for companies with less than INR 25 crore revenue
Fostering Entrepreneurship
Leverage the INR 10,000 crore fund with additional private capital and deploy across various stages of the entrepreneurial ecosystem – entrepreneurship facilitators like TiE, Incubators, Angel Groups, VC Funds, Impact Funds, etc.
Set up infrastructure for incubators in partnership with private players
Setting up of Innovation labs in partnership with private players for pilot testing new innovations and projects
TiE is the world’s largest organization devoted to entrepreneurship, spread across 61 Chapters, 18 Countries, 5 Continents
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National Association of Social EnterprisesA Platform for Social Enterprises, by Social Enterprises
Payal RandhawaExecutive Director, NASE
Aim to accelerate high impact work of social enterprisesEnabling them to reach marginalized and under-served communities in India
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India’s first Industry association for social enterprises, NASE is mandated to work in consonance with all stakeholders to enhance the delivery of social value in India.
Members Include
NASE members work across high impact sectors – financial inclusion, agribusiness, healthcare, education,
clean energy, water & sanitation
Official recognition of social enterprises
Social enterprise parks along the lines of Software Technology Parks and encourage preferential benefits for social enterprises across major towns in India
Extending priority sector lending and 2% CSR to social enterprises
“Panel Member” on the high level committee on CSR and social impact assessment measures
Increasing access to External Commercial Borrowing (ECB) funding by social enterprises
Incentivize social enterprises (tax incentives, capital subsidy, part-operational subsidy on inputs like electricity, internet, etc.)