Case Studies
TDS on E-commerce
Context
The Finance Act of 2020 introduced Section 194-O under the Income-tax Act of 1961, mandating that e-commerce operators (ECOs) deduct or withhold tax at a rate of 1% of the gross amount of sales of goods or services, or both. This created significant cash flow issues for many online sellers, particularly small businesses.
Our Approach
To address these challenges, roundtable discussions and stakeholder meetings were conducted. The issue was formally raised through submissions and discussions with key organizations, including:
- ASSOCHAM
- All India Online Vendor Association
- Ministry of Finance
- Department for Promotion of Industry and Internal Trade (DPIIT)
Outcome
As a result of these efforts, the Finance Minister announced in the 2024 Budget a revision of the TDS rate for online operators, reducing it to 0.1%. This revision provides crucial relief to sellers on platforms like Flipkart, Amazon, Swiggy, and Zomato by improving their working capital availability, allowing them to operate more efficiently.
Import Duty on Cancer Drugs
Context
Certain life-saving cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab—manufactured by AstraZeneca—were previously subject to a 10% import duty. This added financial burden on patients and healthcare providers, despite the essential nature of these drugs.
Our Approach
To advocate for the removal of this tax, representations were made to key government bodies, including the GST Council, CBIT, and the Department of Pharmaceuticals. The issue was also escalated to the Hon’ble Finance Minister through parliamentary channels.
Outcome
As a result of these efforts, the government announced in Budget 2024 that these cancer drugs would be exempt from import duty, making them more accessible and affordable for patients in need.
Angel Tax
Context
Angel Tax was introduced in 2012 under Section 56(2)(viib) of the Income Tax Act, 1961, imposing a 30% tax on the amount raised by startups from angel investors when the funding exceeded the fair market value (FMV) of shares. In Budget 2023, the scope of this taxation was expanded to include foreign investors, making it even more challenging for startups to raise capital in private markets. This became a significant deterrent for investment in India’s startup ecosystem.
Our Approach
To address this issue, the largest association of VC/PE firms in India was engaged, and multiple submissions were made to DPIIT officials and the Ministry of Finance. The discussions highlighted the need for globally accepted valuation methods in private markets and brought attention to precedents from other economies where such taxation was not imposed.
Outcome
As a result, Angel Tax was abolished for all classes of investors in Budget 2024. This landmark decision is expected to unlock a wave of investments in privately held companies, significantly boosting India’s startup ecosystem.
Online Gaming
Context
Online gaming faced outright bans in several states and an uncertain regulatory regime. There was no guiding policy document on the classification of providers for online gaming companies and the responsible regulatory ministry.
Our Approach
Submissions and representations were made to officials, as well as the Finance and Industry Ministers of Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka. The Ministry of Electronics and Information Technology (MeitY) was suggested as the nodal authority to frame guiding policies and designate the appropriate regulatory ministries.
Outcome
While regulatory hurdles remain, the Union government introduced IT amendments to clarify the classification status of online gaming and the responsible nodal ministry.
FDI in Insurance Aggregators
Context
India is a highly under-penetrated insurance market, requiring private and foreign investment to drive innovation and expansion. However, insurance is a highly regulated sector, and the government had capped FDI at 49% for new-age insurance aggregator businesses. These aggregators sought an increase in the investment threshold.
Our Approach
Submissions were made to IRDAI, DPIIT, the Ministry of Finance, and NITI Aayog to advocate for higher FDI limits. Multiple roundtables and stakeholder consultations were held, emphasizing India’s lack of a large-scale social security scheme.
Outcome
The government approved 100% FDI for insurance web aggregators, enabling companies to scale, innovate, and drive greater adoption of life and health insurance through digital platforms.
PLI Scheme
Context
The government introduced the Steel PLI scheme, but many stakeholders found it unattractive due to limited scope.
Our Approach
Submissions were made requesting additional subcategories in the Steel PLI scheme to include wires, bright bars, and stainless-steel components. Further clarifications were sought regarding eligibility criteria, investment thresholds, and incremental production requirements.
Outcome
The government introduced PLI 2.0 for specialty steel, incorporating several stakeholder recommendations.
