It would be difficult to “justify” exempting certain firms coming back to India from paying tax, while asking others to pay up, the minister said in an interaction with journalists from The Economic Times.
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“These companies went outside for their own selfishness…not because of any pressure or other reason. They wanted to do better tax-planning…they enjoyed that benefit. Why they want to come back is not an altruistic motive. They want to list in India because here’s where you get the valuations. India’s growth story is unparalleled in the world and that’s why they want to come here,” he said.
Also read | More startups India-bound, map ‘reverse flip’
ET has reported earlier that several unicorn startups including Pine Labs, Zepto, Meesho, Razorpay and Eruditus have been planning to move their headquarters back to India from jurisdictions such as Singapore and the US.
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“So if they have to pay tax, it’s good. It’ll help us give more scholarships to poor children or build homes for the poor or replace the slums with proper housing. We have a lot of plans for this country and the tax they are paying is from their income on which they initially saved tax,” Goyal added.
At the time some of these companies were set up, quick and adequate funding was hard to come by locally. As a result, many startups turned to foreign investors, which required them to set up holding companies overseas. “In hindsight, this is becoming a big issue,” said one founder.
Now, a number of these firms are looking to move their base back to India looking to benefit from the rising valuations being offered by domestic public markets to technology ventures.
In January last year, US-based retail major Walmart paid nearly $1 billion in taxes to the Indian government during the separation of PhonePe from parent Flipkart, and the return of the fintech company’s holding entity to India.
Shortly after that, the Economic Survey for 2022-23 laid down recommendations for the Union government for tax simplification to accelerate the process of reverse-flipping, or shifting domicile from overseas locations back to India.
Goyal also spoke about the angel tax issue affecting startups. The norms around setting of valuations and the applicable tax were brought in as “fly by night companies” were being created and used for “hawala transactions or creating capital,” he said.
“That was the reason that taxes were brought in…and valuation norms have to be there. There is an indirect impact on startups…so we have to balance the two. If we totally open it up, then the startup issue will be resolved but the problem of the other sort will start again,” he said.
“The government has intelligently done that. If you have such an issue, there is a DPIIT committee, you can come before that, register, and they’ll hear your case…revenue officials are there (on the committee) and approve it. So we have created that mechanism. It’s working,” he added.
