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Tech Startups Eye Potential of Local SMEs

Indian technology startups that cater to small businesses across the world are waking up to the potential at home, using mobile apps to tap the country's numerous small and medium enterprises (SMEs) with offerings in areas such as search-engine optimisation and analytics.Proliferation of smartphones in India has made it possible for startups such as Nowfloats, Whatfix and Zoho, which count the US as their primary market, to gain a foothold in the largely untapped domestic SME sector through mobile applications, offering these firms basic features for free with an aim to turn them into paying cus tomers once they are hooked.
“We started with a search-en gine optimisa tion tool for SMEs but real ised that if they didn't imple ment our sug gestions, there were no results. That's when we made our first tool to handhold SMEs for implementing this and it evolved into a different suite,“ said Khadim Bhatti, cofounder and chief executive of two-year-old startup Whatfix, which makes interactive how-to guides for the Web.
The company, which recently raised `. 5.5 crore from Helion Ventures, sees about 10% of its free users eventually pay for its analytics-enabled models.
Small businesses in India will look to spend ` . 71,300 crore on IT, especially in social media, mobile, analytics and cloud, offered as cloud-based freemium models, with options for running on mobile and pay per use, according to Zinnov research.

sources Economic tims

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#E-Commerce Platforms and #Service tax involved

1. INTRODUCTION

There has been so much euphoria with regard to Indian E-commerce story and is on track to become the world’s fastest growing e-commerce market. This growth story is being driven by robust investment activity by VCs, Angels and the rapid increase in internet users. Internet users in India have gone up from 50 million in 2007 to 300 million in 2014. As per Morgan Stanley, size of the Indian internet market is expected to rise from $11 billion in 2013 to $137 billion by 2020 and market capitalization of these internet businesses could touch $160-200 billion from the $4 billion at present. 

Let’s understand various e-commerce models from the indirect Tax perspective:-

I) SUPPLY OF GOODS

E-commerce Platforms have entered into Memorandum of Understanding with seller to promote the business of seller. This type of business has several models and service tax to be levied accordingly. Following models have been explained herein.

A) Direct Supply from Seller to Customer

Seller have own website for soliciting their business and not relying on online aggregators like Flipkart, Amazon, Snapdeal for listing of goods. In this case, VAT shall be charged by seller in case of intrastate transaction and CST in case of inter-state movement of goods.

EXAMPLE

Mr Karan orders a Service book from the Website poojalawhouse.com. Online website shall be maintained by the seller Pooja law House. The invoice of the Book would generate by the Pooja Law which shall levy VAT on the product sold which will look something like this:

II) Supply from Seller to Customer via online Intermediary/Aggregators

Products of sellers are listed on websites like Flipkart, Amazon, Snapdeal who have entered into MOU with ecommerce Platforms. These orders are in turn given to the Seller for delivery of the goods. Seller shall make the invoice and deliever the same to customer directly. Invoice shall contain name of the company/firm, Reg. Address, TIN/CST no. etc. In present case only, Interface is being provided by the online portal.

Example:

Mr Gaurav Agarwal orders iPhone 4s from the Online Website Snapdeal.com. Snapdeal will book order on the behalf of the Seller named WS Retailer. So, Snapdeal will contact with the WS Retailer to deliver the goods to the customer. The seller shall levy VAT on the goods sold by seller which shall look something like this:

Now these online portals Flipkart, Snapdeal etc. shall generate an invoice of such services like Booking, Commission, Courier, Shipping charges etc. in the name of Seller, as these charges are covered under the definition of taxable services as per the provisions of Finance Act, 1994. In continuation of above example, Snapdeal will generate an invoice and service tax to be charged which will look something like this:

Bill to be charged shall vary according to terms and conditions contained in Memorandum of Understanding with sellers. For example- If the goods are delivered by e-commerce platform to customer then shipping charges shall be charged by platform in the bill. Shipping charges shall also be charged in bill and liable to service tax.

III) Seller to Online Portals to Customer

In this case , seller shall sell goods to e-commerce platform who in turn sells to final customer. Role of e-commerce site shall not be limited to provide interface but becomes the owner of the goods.

For Example:

Mr Sushant Kapil orders iPhone 5s from the Online Website www.alidaddy.com. This site will book order on the behalf of the seller and purchase the goods from Manoj Electronics to deliver the goods to Customers. The invoice of iPhone 5s would be generated by the Manoj Electronics including TIN No. and address to the Website. Now, this site will issue an invoice to Customer.

This site will generate an additional invoice of such services like Booking, Commission, Courier, Shipping charges etc. in the name of Seller XYZ Enterprises which will be exactly the same as discussed in Model 2.

2. RENDERING OF SERVICES

Let’s first define service as per Service Tax

Section 65B(44) of ST Act ‘Service’ means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include -

(a) An activity which constitutes merely,––

(i) A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

(ii) A transaction in money or actionable claim

Many E-portals websites are in existence to promote the business of rendering services on behalf of service provider. Various Service model are mentioned below:-

A) Service rendered by Online Portals ( like Makemytrip, Expedia etc) to the Service Recipient

If the service provider is providing service to the customer with help of intermediary (Online Aggregator),in that case service tax shall be levied on the bill raised by Service Provider to the customer. Online Aggregator /intermediary shall raise bill towards service provider and service tax to be levied on same.

For Example- Online service providers (like makemytrip, booking.com) provide the relevant information on destinations, hotels and Airports. They have entered into MOU with hotels and airlines. Invoice is raised by the Service provider (hotel) on the customers. Makemytrip acting as online aggregator raises invoices towards hotel. Service Tax shall be levied on the amount of bill issued by online aggregator.

B) Direct rendering of Service from Service Provider to Service Receiver

If the service provider is rendering the online services, then service provider shall be liable to charge service tax from the customer. For example – Online Repairing of computer being provided by the company then it shall be liable to charge Service tax from the customer.

C) Service being provided from Customer to Customer

In case of customer to customer transactions, website does not sell anything but provides a platform for the customers for doing sale and purchase .In turn charges for the commission for the service provided and same shall be liable to service tax . No chargeability of Sales Tax in such transactions.

D) Crowdfunding Websites

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. These have been becoming very popular of late. People have been able to raise large capital for their venture. These platforms like pikaventure.com, Indiegogo.com and many others are helping entrepreneurs to raise capital for their project. In turn charge minimum fees for raising such amount if target funding is achieved. Amount of fee to be charged shall be liable for service tax.

Issues

The current dispute has arisen in case of e-commerce companies that undertake storage of goods procured from various sellers in their warehouse before dispatching them to the respective buyers. It appears that Karnataka VAT authorities are of the view that in such cases, the e-commerce companies are involved in supplying and distribution of goods and, therefore, would qualify as ‘dealers’.. The authorities are also of the view that these companies act as commission agents or consignment agents of sellers. Therefore, these companies are covered under the definition of ‘dealers’ and, therefore, are liable to discharge VAT. “The Karnataka Government plans to amend the Value Added Tax Act and bring transactions from e-commerce marketplaces under its ambit, reports The Times of India. The government says the amendment will deal with transactions on e-commerce sites that follow the marketplace model like Flipkart, Amazon India and Snapdeal and it is expected to be passed during the upcoming winter session of the state legislature. This action by one state government will change the whole scenario, wherein this industry would be greatly demotivated. Also the position of service tax law would need to be re-assessed after this.

Even though it has been decided issue that levy of tax would arise on occurrence of a taxable event. In the case of levy of VAT, the taxable event is sale or purchase of goods. In the case of e-commerce transactions, the companies are not involved in sale of goods at all. The primary object of the companies is to offer online portals where the buyer and the seller meet and the buyer places an order for goods advertised on the portal. The invoice is raised by the seller on the buyer. No invoice whatsoever is issued by the e-commerce company on the buyer in respect of sale of goods. Clearly, e-commerce companies are service providers.

 Conclusion

There has been clarity with regards to levy of indirect taxes on ecommerce transactions. Government of the day needs to incentives this sector and assist to make it competitive keeping in view their vision of “MADE IN INDIA CAMPAIGN” rather than burden with taxes.

Tech Startups EXPLORE SME Segment

GIVING A PUSH Startups are working on advance payment model, identifying right customers and building trust over a period of time

Technology startups are finding new ways to tap into the hugely lucrative small and medium enterprises (SMEs), even as investors shy away from the segment which is plagued with problems such as rampant payment defaults and general averseness to technology.Working on an advance payment model, identifying the right customers and building trust over a period of time are among the few measures that startups have so far adopted.
The biggest problem with cash-strapped SMEs is that customer acquisition costs are high while the average payments are low, leaving the startups with little option but to shut shop in case the payments do not come on time.
“It is a push factor rather than a pull factor. It's like selling insurance; nobody buys it voluntarily , someone has to convince them to....As a result, Indian SMEs are a no-go sector for Indian venture capitalists,“ said Sharad Sharma, co-founder of iSpirt, adding that the software product think tank is working on a program that aims to change the buying behaviour of the firms in the segment.
But the market is large, at about $370 million (about ` . 2,300 crore), according to IT industry lobby group Nasscom. The decline in interest from the venture capitalists comes at a time when even large companies such as accounting software maker Intuit, German software firm SAP and Microsoft are eyeing the sector.
But startups like Maximojo are not willing to back down. Charging customers in advance and cutting off services at the end of a certain period, just like telecom operators do, is something that Sudhir Mody's Maximojo is working on.
“Payment default rates have fallen because we have learnt to approach the right customers,“ said Mody, whose three-year-old firm enlists hotels on popular trip planning websites.
Gartner categorises small businesses as those which have fewer than 100 employees and mid-sized enterprises are those which have be enterprises are those which have between 100 and 999 employees. These companies would rather reinvest their capital in the business than in new software, said Ajeet Khurana, an angel investor at Maximojo.
“Because there are so many problems, startups should look at large market potential. If they are looking at niche markets, why would you bother?“ said Mohan Kumar, executive director, Norwest Venture Partners India, who has backed customer engagement solution Capillary Technologies and hospital management software Attune Technologies in the past.
Cash-only payments, whose sources are sometimes questionable, are another worry for startups. Unlike in other countries, credit card penetration is low in India, and the practice of automatically deducting money from customers on a regular basis is not allowed by the Reserve Bank of India.
As a result, startups also need to figure out a way to ensure payments from the customer's bank account can be pre-authorised, much like the equated monthly instalments work, said Kumar. Having an inside sales team that regularly keeps in touch with the customers, also helps. “Then it becomes a scalable business model,“ said Kumar.
Once they gain the trust of SMEs, startups find that they are able to get them on board to make online transactions regularly.





Startup hiring process India CS GAURAV +919990694230

  Startups are taking the unconventional route to hire people. With companies valuing cultural fit just as much as expertise, they are innovating with interview formats. If you aspire to work for a startup, here's a tip: Expect the unexpected. Saumya Bhattacharya and Devina Sengupta report URBAN LADDER The Airport Test Online furniture curator Urban Ladder has, by its own admission, put in place a “cumbersome“ interview process to fluster prospective employees. The rigorous process starts even before hiring managers meet the candidate. As a first step, the company screens the candidate on phone. In the 45-minute conversation, the functional manager tests the candidate's basic communication, past experience, basic fit and career plans. Next, an exercise tests candidates' problem-solving skills. This is literally the start of the interview, and some candidates drop off at this level itself. Time spent on the exercise: between three and six hours. And if you are an engineer, you will find yourself in the midst of a hacking test.A week later, the interview is scheduled. THE GOOGLY: WHEN THEY'RE `STRANDED' Candidates are given an `airport test' to gauge whether they can hold a conversation if they are stranded at an airport for two hours. The interviewer asks people about their hobbies or encourages them to talk about something they are extremely passionate about. The questions are not very structured but are left for the interviewee to decide based on the flow of conversation. The idea is to keep the conversation informal. The fundamental premise of hiring is potential more than performance.Since we are trying to do something that has not been done before -selling furniture online -we need a rigorous process to spot talent RAJIV SRIVATSA, Co-founder & COO JOMBAY Testing Area: The Reception Area Talent assessment and analytics platform Jombay keeps a keen eye on the candidate from the word `go'. You are being interviewed even when there is no one around you. Or you could be asked to play the guitar when you may not even when you may not even know how to hold one. Jombay often conducts a rapidfire round centered on the candidate's personal life. Current affairs, relationships, wellness, food and art are part of the conversation, aimed at evaluating the cultural fit.Candidates are asked to create their own psychometric report. They are asked to compare that with one generated by Jombay, and explain the perception gap. Recruiters at Jombay sometimes make the candidates sit for 30 minutes in the reception area and observe ception area and obser the wait. They usually keep five books, and an equal number of newspapers and magazines at the reception and closely watch the candidate's behaviour to infer the cultural or personality fit from which books, magazines and newspapers they pick up. At junior-level interviews, candidates are asked to play the guitar to check how the person adapts or learns in unfamiliar territories. THE GOOGLY: PUSH-UPS & STRETCHES Half the office was doing push-ups and stretches when a candidate arrived. The hirers told him this was their exercise time, and he could join in. They were checking the candidate's adaptability. He happily joined in. There are people who look at the notice boards and our awards, and try to absorb as much as they can about the company (the smart ones). There are people who portray that they are reading The Economic Times but don't flip the page at all (those trying to make an impression), and there are people who read inspirational books (startup material) MOHIT GUNDECHA, CEO & co-founder, explaining the test at the reception IBIBO Many Levels to Cross Ibibo Group founder Ashish Kashyap has a unique task -he approves every single hiring.Group companies Goibibo and RedBus have 400 and 650 employees respectively, all of whom have been vetted by him. At ibiboGroup, the hiring process has been the same since Day 1. If you are being hired for mid-level positions, you get to face at least you get to face at least three interviews. At the senior level, there are at least five levels of interview.Interviewers can be junior to the prospective hire. Each interviewer rates the candidate and writes a small essay. Ratings are then aggregated. At this stage, it is also decided if the candidate needs to be interviewed by more people. Then comes the approval from the founder based on the hiring dockets and interviewer feedback. The key reason for close involvement is to ensure that we continue to maintain our culture; ensure that people we are hiring are a cultural fit to our philosophies ASHISH KASHYAP Founder & CEO PAYTM Take Exams From Home Indian mobile payments and ecommerce platform, Paytm, has a coding competition wherein candidates can work from home. This part of the interview process, implemented in 2013end, is meant to recruit engineering students from remote areas. The coding competitions are held online, eliminating the need for test centres, especially for those who want to work for Paytm from remote areas. THE GOOGLY: DIRECT EXPERIENCE For management students, in 2014, the company came up with the idea of letting shortlisted candidates work from the Paytm office for a few days. The idea to let senior employees test their working conditions and teams came from a few entrepreneurs who wanted to figure out if they were comfortable working in the e-commerce company. The management thought this was an excellent way to get feedback and ensure the right candidate is selected. This also helps Paytm extend the message that a cultural fit is important for the company. We get to hire from Shillong, Guwahati and not go there.Students get to crack the code from home and we save initial travelling costs VIJAY SHEKHAR SHARMA CEO & founder