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OCEN receives Digidhan 2021-22 award for Special Contribution to promotion of Digital Payments

We are thrilled to announce that Open Credit Enablement Network (OCEN) has been conferred with the prestigious Digidhan 2021-22 award for their Special contribution to the promotion of Digital Payments. The award ceremony was held recently in New Delhi, organized by the Ministry of IT and Electronics, and was handed over to Sagar Parikh, the OCEN lead at iSPIRT, by the Honourable Union Minister, Mr Ashwini Vaishnav.

The Digidhan Awards recognize and celebrate the outstanding contributions made by individuals and organizations towards promoting and adopting digital payments in India. This year, the award was presented to OCEN for their revolutionary work in creating a standardized digital credit infrastructure that enables lending institutions to access and disburse loans digitally.

OCEN‘s platform acts as a bridge between lenders, borrowers, and other credit infrastructure providers, enabling them to interact with each other in a secure, reliable, and efficient manner. With OCEN, borrowers can easily access credit from multiple lenders, while lenders can easily verify the borrower’s identity, creditworthiness, and other relevant details before disbursing the loan.

The platform’s open architecture and standard APIs make integrating with OCEN easy for other credit infrastructure providers, creating a robust credit ecosystem that benefits all stakeholders. Moreover, OCEN’s platform ensures that all transactions are secure, compliant with regulatory requirements, and protect user privacy.

Speaking at the event, Sagar Parikh said, “We are honoured to receive the Digidhan award for our contribution to the promotion of digital payments. At OCEN, we believe that access to credit is a fundamental right, and our platform is designed to ensure that every Indian can access credit securely and efficiently. We are grateful for this recognition and will continue to work towards our mission of financial inclusion for all.”

The Digidhan award is a testament to OCEN’s commitment to promoting financial inclusion and enabling digital transformation in India’s credit ecosystem. The platform’s standardized infrastructure and open architecture have the potential to revolutionize the lending landscape in India, making it easier for borrowers to access credit and for lenders to disburse loans.

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ONDC – Is it the next game changer for Digital India?

If you have not come across ONDC – Open Network for Digital Commerce, its time you know about it and this post is to help better understand what problem it addresses, how it operates, and the value that it brings to consumers, businesses, retailers, existing e-commerce platforms and the state.

Problem statement

There are a number of pain points around current digital commerce:

  • Its dominated by a few players e.g. Amazon, Flipkart, Zomato, MakeMyTrip, etc.
  • Consumers have to go to multiple platforms to search and explore the products/services they would like
  • Consumers are restricted to only a subset of products/services available on the platforms
  • Consumers need to go to multiple places for different products/services
  • Penetration is not widespread across the country and small towns
  • Small businesses are not able to participate and sell in the digital commerce space

Solution

Open Network for Digital Commerce is a network of e-commerce. It is a network-centric model where, so long as platforms/applications are connected to this open network, buyers and sellers can transact irrespective of the platforms/applications they use. It’s like “UPI of e-commerce”

Source: ONDC.org

ONDC works on 3 important use cases to solve the problems, which explained very well by ThinkSchool

Discoverability – allows you to discover products across different platforms using a common catalog

Interoperability – where you can combine multiple platforms to accomplish different services e.g. product with delivery, services with payments etc.

Price comparison – allows you to compare prices across these platforms e.g. ticket prices across different ticketing platforms.

How does it work?

Through an open protocol network, various selling /buying apps such as flipkart, dunzo, airtel, paytm will connect to the network and the consumer will be able to access the product/services through any of the apps.

You can either connect to the buyer network or seller network. One of the important aspects of ONDC is to standardize the product/services catalog so that consumers get a common experience. All the technical specifications are available here

Role of ONDC

ONDC will play three roles as laid out by their CEO

Development – Build and sustain the network with cutting-edge tech and facilitation widespread participation of ecosystem players

Network Management – Establish a code of conduct for the network, with policies and rules for the network

Service Delivery – Foundation services for operations of the network e.g. registry, certification, grievances redressal

Value for stakeholders

Consumers – amazing way to explore and get the best product/services across platforms, sellers

eCommerce Companies – Gets a wide reach with Govt. backing to get to a large user footprint, make them more competitive

Small Businesses – Gets them to sell products and services across the country, without having to be associated with a single platform

Government – Accomplish the mission of connecting India digitally and enhancing the economy significantly

Challenges

This is a massive and ambitious project, balancing of different stakeholders is going to be huge, as well as connecting all of them. Also ensuring the quality of service is going to be a big factor, as the trust factor of the platform plays a big role in deciding where to buy.

But given the Government backing and really smart think tank behind this, these challenges may likely be overcome.

Key Takeaway

ONDC looks to be a huge potential and another game changer for an Atmanirbhar Bharat.

More Resources

ONDC Strategy Paper

ONDC on twitter

ONDC CEO Blog on ONDC 101

Nandan Nilekani ONDC Keynote

ThinkSchool on ONDC

Benefits and Glitches explained in detail

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PM-WANI: Business models

India, a large country with a lot of geographical and economic diversity, faces interesting challenges with last-mile connectivity for internet users. PM-WANI programme provides a powerful technical and policy framework towards the goal of broadband proliferation across the country.

iSPIRT Foundation has been involved with the PM-WANI programme right from its inception. Dr Pramod Varma, Siddharth Shetty and other volunteers, were involved with the technical framework for unbundling the internet access and ensuring interoperability among all participants

As of date, the Centre for Development of Telematics (CDoT) and Telecom Regulatory Authority of India (TRAI) has been ably managing the mantle with all aspects related to the PM-WANI framework.

The PM-WANI has a unique, distributed and unbundled architecture. It has the following participants:

PDO – Set up and maintain the access point (AP). Users connect to this AP to access the internet.

PDOA – Provides the technical backend for the PDO for Authentication, Authorization and Accounting (AAA). PDOA provides a facility for the PDO operator to define broadband sachet for their users (e.g. 1GB data for Rs 5). PDOA also stores the users’ usage data as per the government security compliance.

App-Provider – Operates a mobile application for PM-WANI. A user will use this mobile application to discover a PM-WANI-compatible network. The App-Provider maintains the user KYC.

Central-Registry – It maintains the details of every registered PDO, PDOA and App-Provider. It is generally used to validate requests made between the participants. 

PM-WANI facilitates the delivery of broadband access to users using PDO-operated WiFi access points (AP). A telecom/internet service provider provides the backhaul internet to this AP.

Instead of needing multiple licences and compliances to commercially distribute internet, in PM-WANI’s case, the PDO requires absolutely no compliance or licence to distribute internet locally! 

That does not mean the security is compromised in any way. The user KYC is handled by the App-Provider and the usage logs are maintained by the PDOA

User Flow

PM-WANI as an earning opportunity for small entrepreneurs

This programme offers great monetary opportunities for entrepreneurs. Multiple companies are coming up with varied plans for becoming a PDO / PDOA. Let us discuss some of them 

Case 1: Become a PDOA with a C-DoT software stack and onboard PDOs

This is for entrepreneurs to start their own PDOA business and create a network of PDOs (on their own or onboarding other small-business owners) 

The Centre for Development of Telematics (C-DoT) provides a complete PDOA software stack as Platform as a Service(PaaS). Here, it takes care of all the technical requirements (including software, server and regulatory requirements). This enables entrepreneurs to start their PDOA operations without getting into the technical nitty-gritty. They charge a very low fee of Rs. 15000 for 3 months.

Costs

Here is the cost breakdown for a PDO for Year 1:

Annual Internet pricing – 50 Mbps connectionRs.600/month = Rs 7200/-
Annual Electricity & Router MaintenanceRs.150/month = Rs 1800/-
Indoor AP which is CDoT PM-WANI compliant (WAYU)Rs. 5300/-
Total Investment for year 1 for a PDORs. 14300/-

Cost breakdown for a PDO Year 2 onwards:

Annual Internet pricing – 50 Mbps connectionRs.600/month = Rs 7200/-
Annual Electricity & Router MaintenanceRs.150/month = Rs 1800/-
Indoor AP which is CDoT PM-WANI compliant (WAYU)Already Purchased
Total Investment from year 2 onwards for a PDORs. 9000/-

In this business case, we consider that 95% of the voucher collection goes to the PDO and 5% goes to the PDOA

The annual investment for the PDOA is Rs. 60000

Value Proposition for PDO

A PDOA can create an excellent value proposition for a PDO using this model.

We have considered the average voucher cost for a user to be Rs 2, Rs 5, Rs 10 and Rs 15., eg. a user will buy an internet sachet/voucher of Rs. 2 for 1GB data a day.

The below table shows the cost-benefit analysis for Year 1 wherein a PDO charges Rs 2 per voucher. Annually, PDO breaks even with just 20 daily users and achieves 100% return-on-investment (ROI) with just 40 daily users in the first year itself! Year 2 onwards it’s just 13 users to break even and 25 users for 100% ROI.

PDO Year 1

Daily Cost Per User(in Rs)No of daily users for breakevenNo of daily users for 100% ROI
22040
5816
1048
1536

PDO Year 2 onward

From year 2 onwards, the ROI starts getting even sweeter as the operating cost further reduces to Rs. 9000 for a year 

Daily Cost Per User(in Rs)No of daily users for breakevenNo of daily users for 100% ROI
21325
5510
1035
1524

Value Proposition for PDOA

The below graph shows the number of PDOs needed to be deployed for a PDOA to break even for different voucher costs and daily users

Case 2 – Become a PDO with other private players

There are quite a few companies that allow people to deploy their own PDO directly. They provide a PDO infrastructure (AP and allied software) for Rs 12000 a year

Costs

Here is the cost breakdown for a PDO:

Annual Internet pricing – 50 Mbps connectionRs.600/month = Rs 7200/-
Annual Electricity & Router MaintenanceRs.150/month = Rs 1800/-
AP which is PM-WANI compliantRs. 12000/-
Total Investment for year 1 for a PDORs. 21000/-

Value Proposition for PDO

Daily Cost Per User(in Rs)No of daily users for breakevenNo of daily users for 100% ROI
22958
51224
10612
1548

PM-WANI Challenges

Interoperability 

One of the major challenges that PM-WANI is facing right now is protocol compliance. Because of this, some of the PM-WANI Apps do not work interoperably with the PDO. 

Example: A PM-WANI app developed by company A is not compatible with a PDO of company B. A’s app only works with A’s PDO

Data Sharing 

The protocol, as of now, does not have a standard way to share usage data between the participants. Hence, the app provider does not get any incentive when a user buys a PDO/PDOA coupon due to this lack of data sharing. Also, for implementing roaming between PDOs, it is essential that there is some data-sharing standard available between multiple PDOAs.

Grievance Redressal

This is another area that is not regulated at the moment

What iSPIRT is up to

We are working on multiple fronts to solve the PM-WANI challenges. 

For the interoperability issue, we are developing a certification mechanism for PM-WANI that cthe PDOA or App-Providers can easily usewith minimal complexity.

We are developing a reference implementation for PM-WANI. The community can further build on it and come up with more interesting business models for PM-WANI.

We are also working on proposals for improving the protocol to address the challenges mentioned in the previous section.

Please feel free to write to Saurabh Chakrabarti at [email protected] for any questions.

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Mapping Policy a major Progressive reform for Digital India

Almost everything in the tangible world has a location attached. In the future Data Economy, map information is going to be one very important piece of information.

The Government of India announced a policy and new guidelines of using Mapping and relaxed the Policymaking it simple enough, aiming at unbundling the economic value across all sectors in the economy. 

Click here to read the entire notification issued by the Ministry of Science and Technology, Government of India.

iSPIRT organised a panel discussion on the policy announcement to understand the policy and its importance for India. This blog post is an exciting read and listen for young innovators wanting to reimagine the economy as almost each and every thing will require mapping.

Following participants took active part in discussions.

  1. Lalitesh Katragadda, Co-Founder of Indihood
  2. Umakant Soni, Co-founder & CEO of ARTPARK (AI & Robotics Technology Park), AI Foundry
  3. Mohit Gupta, Co-Founder of Zomato
  4. Sudhir Singh, Volunteer at iSPIRT (Policy Hacks Anchor)

Recorded Video Transcript

Subsequent to introduction, Sudhir Singh (anchoring the Panel) opened the discussion asking Lalitesh Katragadda to explain important features of Policy announced.

Lalitesh explaining the policy salient features said “all the other Map’s policies that used to exist in various departments currently stand null and void, and they are replaced by this one very simple policy that has been issued, and people who embark on Mapping don’t have to worry. 

He further added, “ if you are Indian company you can map anything except for a small blacklist of attributes and features that you should not map, I’m sure will be related to military and security. And, you can map using whatever technology that you want, you can use lidar, you can use high-resolution cameras, underwater, over water, anything. You cannot just create Maps you can disseminate, sell and distribute.” 

“The only restriction if anything is that international mappers are restricted to a higher level of resolution for security purposes and they can also have access to high resolutions Maps created by Indian entities. This new policy is so simple that it creates freedom to map”, he said.

Mohit Gupta said, “for me the most important thing is Government taking notice”, and “coming to an understanding about the digital infrastructure required to build high-quality businesses and services across a large spectrum of different areas”.

He also expressed his happiness on the news that the Indian Space Research Organisation (ISRO), a Government organisation and MapmyIndia a private Indian company are collaborating.  

Mohit Gupta informed that they tried in the past, experimenting with various different players who provide mapping services both Indian and international and understand the importance of alternative options to handle both the precision mapping and business economics.

Umakant Soni started the discussion by quoting an example of google maps and how they had increased the cost from free to 10X to 20X and made it expensive to use their service and almost single-handed dependence upon them.

He said that, “fundamental thing that was different in the mobile revolution was the use of location” and that, “the immersion of the digital world into the physical world started with the whole mobile revolution and I think Zomato and Ola kind of companies have actually really profited from that”.

According to him, If out of every ₹4 that a business earns out of its services, it is spending ₹1 on mapping, then it is tough to sustain certain kinds of business models. Hence, it is a great move to create more options, thereby reducing the price in the long-term and benefit the Indian consumer.

He gave a perspective on the amount of value mapping technology and applications can unlock. Quoting the survey he explained 90% of the value lies in intangibles and this is not possible to unlock this value without having easy reformative mapping policy, that will help India to build the 5Trillion 10 Trillion Economy. 

“The challenges that we are at 3 trillion, wanting to go to 10 trillion, and we are talking about additional 7 trillion out of that 90% i.e. 6.3 trillion is going to be in the digital domain. If you’re not own the critical pieces which are going to create the intangible assets,  we will not be reaching 10 trillion. We might actually get to 3.7 or 4 trillion that’s it in another 10 years” explained Umakant.  

The other perspective on the value that Umakant gave was on how Google is inherently underestimating its business targets of 5 billion revenue from mapping. Quoting Baidu’s estimates from China, he explained that more than 70% of this value is lying in the future data economy, where location and mapping data will actually flow from sensors, almost everywhere in our lives. According to him, this data will augment the present Satellite imagery and physical mapping. 

“You will be able to catalogue and tag every single object that you see in the physical world around you and that is the future of mapping, and this policy, actually unleashing this whole system of innovation that is now possible because this tiny little camera has got lidar,  you can actually see a single object, and that’s where the computing moving onto the edge”, said Umakant. 

He further added that “I mean we have not even started to comprehend what it might be”, And  “that’s why it’s great news for Indian start-ups founders. What is next right after the mobile revolution, I think Maps. You know combined with AI and robotics they are going to form the next big wave of change in terms of massive business potential we have”, said Umakant.”

On the question of whether we can go International, Lalitesh answered,  “when we have the best mapping technologies available and that will only happen if we start in our own backyard.” 

He had further explained that according to a rough guess not more than 15% of India is mapped and we need to map everything that matters in India for development. According to him, there is a lot of work to be done, it won’t happen with just one company building it. 

He further added that “democratization can only happen if the underlying layers become accessible which is both coverages has to increase quality has to increase and that can only happen with large amounts of innovation” and making it as easy as creating websites’.

‘So, I am looking forward to a world where we have you know hundreds, if not thousands of mapping innovations coming”, he added. 

Mohit expressed his agreement with Lalitesh on how unmapped India was and explained the Challenge it posed to them in food delivery even to urban dwellers. 

He went on to explain how they had to innovate and add a pre-recorded voice (audio instruction) message for consumer location to solve a problem of precision mapping.

He said that the “Audio instructions “we had to launch and are being used very widely, the last mile addresses and ability to get last-mile addresses accurately is very poor as a result a lot of our riders would end up calling customers for last-mile instructions.”

“Reality is that, there is a lot of ground to be covered for maps”, he added. 

He also informed that they do not like over-dependence on a single player and hence has been doing a pilot almost every year with MapmyIndia. He felt that MapmyIndia has also a room to improve and become competitive to existing major services. 

Sudhir posed a question on how easy it will be to use maps and if the process of using mapping information will be as stringent as existing offline maps, which sometimes require the approval of a senior official like joint secretary of Government of India, to obtain a physical map and use. 

Lalitesh answered, “policy calls for all the government agencies cooperating, obviously if not of security sensitivity, which is most of the mapping data, to be made accessible to Indian company I’m hoping see changes coming” 

Maps that you can depend on how to run on good quality data otherwise they will fail so so this is really enabler I don’t look at the map a product at the map enabling piece of infrastructure that every you know digital entity in India needs to have access to 

Lalitesh further went on to explain how mapping can change lending, by using mapping in property and land record.  According to him, it has the potential to unlock more than 4 and a half-trillion dollars of capital both for small business.  

****The End****

Disclaimer: The discussion and ideas expressed here should not be construed as legal advice. The discussion is conducted with Industry practitioners and experts for purpose of benefiting the Industry members in Software product, IT or ITeS Industry

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PM WANI – Empowering people with Wi-Fi Internet

Wi-Fi Access Network Interface (WANI) that was envisaged by TRAI Consultation papers has become a reality as Government approved it as PM WANI, on 9th December 2020, for exponential proliferation of public Wi-Fi networks.

PM WANI will make it possible millions of Wi-Fi hotspots to emerge across the country, giving easy access to internet to common man. New business models will emerge, making it possible to add another layer of Internet providers with access points being provided by corner shops and stores and others.

The Detailed Document about the Scheme can be downloaded and read at (Click to open) Department of Telecom Site.

The simplicity of the scheme is recognised by the very fact that DOT automatically recognised PDOA after application in 7 days.

PM WANI explained in a snapshot

This PolicyHacks Panel discussion with Dr. RS Sharma, Ex-Chairman TRAI, Pramod Varma, iSPIRT Volunteer, gave conceptual Architecture of WANI, Siddharth Shetty, iSPIRT Volunteer, Shubendu Sharma, Founder of Wifi Dabba and Dr. Ajay Data, Founder & CEO of a Class A ISP and other technology companies.

iSPIRT has been a protagonist of the concept of WANI with Pramod Varma, Siddharth Shetty and other volunteers involved in building the concept to unbundle another layer of broadband level Internet access to masses on the go and in far-flung areas.

Dr. RS Sharma explains,”we came to a conclusion that if we can create a technology architecture for some body to market and provide access by unbundling from ISPs like UPI has done, then it will become seamless and easy to implement and Kirana shops can also provide Wi-Fi without hassle”

“And that is how we came up with the concept of PDO like PCO of Telephone booths and PDOA etc”, he added explaining how PDOA will be a layer above PDO.

The main policy issue here was reselling of the bandwidth, which was addressed and then a consultation papers was evolved and a pilot done to test the concept on ground, he mentioned while explaining how TRAI was involved.

“It is a very asset heavy architecture if a Telco alone has to do all that physical investment till the last wire in your house or each hotspot in country” and “all the fiber in BHARATNET and others that we are laying no body knows at the the end, what we have to do and it requires an ‘entrepreneurial model’ to scale to be putting millions of connection” said Pramod Varma.

In Covid year, we have seen real hardship for people who are not privileged to have broadband access and education of children abruptly stop. “We have to make Connectivity a human right”, says Pramod Varma and explains, that is why, how essentials it is to invest into infrastructure and the last mile becomes people property.

“We had the mental model that, if we can create self sustaining interesting parts of it” Said Pramod, explaining how the concept was evolved. Adding further, that a KYC done ones can give a KYC token that can be used to further to authenticate who the person is on access layer in the Model, without doing KYC again and again. “UPI will further provide the payment model, as we have already solved it”, said Pramod.

“You will have multiple providers come together to unbundle this” Said Siddharth Shetty, adding to the conversation.

Shubendu, from Wi-Fi Dabba who had been thinking this as a ‘business model’, deployed the pilot for testing the concept. Explaining his experience, he said, “we wanted to see if we draw a Internet cable from a router in our office to street side shop, how it is used by people, can people pay for it and use it and in a week we had people instead of buying eclairs asking for a Token to use Wi-Fi”.

“In 2016, we took it as a fulltime project, and this was the time when our problem started as ISPs stopped giving us connection, after knowing we were reselling bandwidth” said Shubendu.

He also explained that, “the kind of paperwork you have to maintain and additional costs you have to incur” does not make it viable for small business to apply for an ISP.

“This policy make life simpler for businesses like us” in entirety, added Shubendu.

Dr. Ajay Data, who founded a Class A ISP in Jaipur, was on panel and said, “I am ‘very positive’ about it and this can revolutionise many many things in this Country”.

He explained, how the product “Vedio Meet” they developed to solve local education problem did not work on HD quality for students in last mile and had to be downgraded to SD quality, because of bandwidth in last mile. “we need to have the internet of the ‘streaming quality’ across country, where HD streams can be delivered on any device and if we can achieve this, rest of the applications will work ” said Ajay Data.

He raised apprehensions, on how it will be regulated on ground without harassment of the PDOs by regulatory bodies, giving examples of how even licensed ISPs are harassed and ISPs are charged AGR even in on sale of Computers and routers. Similar legal issue should not be left unaddressed and should be taken care, in languages (including vernacular medium) for PDOs to be not harassed.

“May be a board (Certificate) can be out in each PDO point to ascertain that local police and enforcement does not harass them”, said Ajay Data.

RS Sharma, addressing concerns raised by Ajay Data, Said, “PM himself has tweeted about this” and leadership knows the exact importance of the policy.

He further explained that, “Retail sale of bandwidth has been made passthrough in the AGR Computation”, either the TSPs or ISP pays for the 8% AGR, retailer has nothing to pay, as it has been already paid for.

Dr. Sharma also explained further, that it can save lot of bandwidth, as content can be maintained locally at local access points and last mile user need not traverse through the upstream network for local content, which is a very useful concept for ISPs and TSPs, to decongest the upstream networks.

The PDOs will not have any problems, as the responsibility of who is accessing what by monitoring SSIDs will lie with PDOA (aggregator), not with PDO.

Shri Sharma added that, “what is important is this is implemented well” sharing the issue with Ajay that many a times polices are misused. And we all hope good intentions will prevail and country will be benefited, he had added further.

The panel discussion ended with note of thanks.

Disclaimer: The discussion and ideas expressed here should not be construed as legal advice. The discussion is conducted with Industry practitioners and experts for purpose of benefiting the Industry members in Software product, IT and Telecom sectors.

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COVID-19 Relief announcement for businesses that may benefit Software product MSMEs

Finance Minister, Nirmala Sitharaman announced stimulus to help economic revival in wake of COVID-19. Out of these measure a major portion was announced for businesses in MSMEs category.

Some of the important measures announced and that may directly benefit MSMEs in Software product eco-system are as given below.

  1. Collateral free loan of Rs 3 lakh crores for MSMEs.  This is expected to enable 45+ lakh MSME units to restart work and save jobs. How and who will disburse this is yet to be announced.
  2. This is an announcement which can be used in best ways by many MSMEs. However, the ease of getting this loan will only be known once the complete process and guideline is issued.
  3. Subordinate debt provision of Rs 20,000 crore for 2 lakh stressed MSMEs.
  4. Rs 50,000 crore equity infusion via Mother fund-Daughter fund for MSMEs that are viable but need handholding. A fund of funds with corpus of Rs 10,000 crore will be set up that will help MSMEs to expand capacity and help them list on markets.
  5. Global tenders will be disallowed up to Rs 200 crore for government
  6. Statutory EPF contribution to be reduced to 10% from 12% for all organisations and their employees covered by EPFO. Government expects this to infuse Rs 6,750 crore of liquidity. This measure is temporary and will provide relief to only those who has substantial workforce in lower bracket of Salaries.
  7. TDS rates have been slashed till March 2021 i.e. for entire financial year almost by 25%. An important rate of TDS applicable here is section 194J which is reduced from 10% to 7.5%. This will just increase the liquidity available in hand of Software product companies. A full list is given in link here at Income Tax site.
  8. The Definition of MSMEs has been revised. This was long due and will help more units to take benefit.  In present definition the distinction between manufacturing & services sector MSME has been removed. The new definition will be based on below norm.
    • Micro units with investment till Rs 1 crore, turnover up to Rs 5 crore
    • Small units with investment till Rs 10 crore, turnover up to Rs 50 crore
    • Medium units with investment till Rs 20 crore, turnover up to Rs 100 crore

iSPIRT was pursuing with Govt. of India to provide incentives for MSMEs to buy from Indian Software product companies.

However, in present situation of high volatility and huge pressure from MSMEs which is a sector that is more important for revival, this has not been considered. iSPIRT will keep pursuing with MeitY and MSME ministry for creating a domestic market access.

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COVID19 strikes cash flow lending for small businesses in the country

Many ongoing industry efforts to bring cash flow lending to life for MSMEs are now on hiatus

COVID19 strikes cash flow lending too

At iSPIRT, with our long-cherished dream of democratising credit in this country, we advocated for and built public infrastructure to enable market players to offer cash flow based lending solutions to small businesses. 

Pre-COVID: We argued that small businesses needed this new breed of products because they were unable to access formal credit otherwise.

During-COVID: As we process, accept and adapt to our new reality as a country, we realise small businesses need something much more urgently than cash flow based solutions from the market – they need rescue and stimulus packages from the government to survive the health and economic distress brought on by COVID19. 

Post-COVID: When the lending cycle picks up again in the market (and we will watch it diligently!) we will revive our efforts to bring cash flow based lending products to the market. For now, we are putting these efforts on a hiatus. This is because we think there’s a while for “Post-COVID” to come and many uncertainties are unfolding every day. So for now, we want to wear a “During-COVID” hat for the foreseeable future. 

This is disappointing for many parallel efforts that were underway in the market

Since July last year, after the U.K. Sinha chaired expert committee on MSMEs submitted its report to the RBI, many parallel efforts including Sahay, revamping of TReDS, PSB59, etc. by different market players were underway to bring cash flow lending ideas in this report to life. iSPIRT engaged with market players to design a digital public infrastructure first approach encapsulated in Sahay. The government was supportive of all of these, highlighting the importance of MSMEs within the economy.

Cash Flow Lending – The idea whose time will come

This slow down in the momentum is obviously disheartening for many iSPIRT volunteers and to all the market players we were working with. Months of hard work may not come to life in the next quarter or two. But these same months of hard work were possible only because we saw ourselves as architects with a 10-20 year horizon to solve India’s hard problems.

Cash Flow lending is a powerful idea to democratise credit in our country. It’s time will come, and come soon. Right now, we need to pace ourselves to our new realities and revive the energy again when lending picks up in this country.

About the Author: Meghana is a core volunteer and orchestrating our efforts in Democraticising credit at iSPIRT. She can be reached at [email protected]

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The future of ‘civic’ technologies after COVID-19

In 1973, the British economist Ernst Schumacher wrote his manifesto “Small is Beautiful”, and changed the world. Schumacher’s prescription — to use technologies that were less resource-intensive, capable of generating employment, and “appropriate” to local circumstances — appealed to a Western audience that worried about feverish consumption by the ‘boomer’ generation. Silicon Valley soon seized the moment, presenting modern-day, personal computing as an alternative to the tyranny of IBM’s Big Machine. Meanwhile, in India too, the government asked citizens to embrace technologies suited to the country’s socio-economic life. Both had ulterior motives: the miniaturisation of computing was inevitable given revolutions in semiconductor technology during the sixties and seventies, and entrepreneurs in Silicon Valley expertly harvested the anti-IBM mood to offer themselves as messiahs. The government in New Delhi too was struggling to mass-produce machines, and starved of funds, so asking Indians to “make do” with appropriate technology was as much a political message as it was a nod to environmentalism.

And thus, India turned its attention to mechanising bullock carts, producing fuel from bio-waste, trapping solar energy for micro-applications, and encouraging the use of hand pumps. These were, in many respects, India’s first “civic”, or socially relevant technologies.

The “appropriate technology” movement in India had two unfortunate consequences. The first has been a celebration of jugaad, or frugal innovation. Over decades, Indian universities, businesses and inventors have pursued low-cost technologies that are clearly not scaleable but valued culturally by peers and social networks. (Sample the press coverage every year of IIT students who build ‘sustainable’ but limited-use technologies, that generate fuel from plastic or trap solar energy for irrigation pumps.) Second, the “small is beautiful” philosophy also coloured our view of “civic technologies” as those that only mobilise the citizenry, out into farms or factory floors. Whether they took the form of a hand pump, solar stove or bullock cart, these technologies did little to augment the productivity of an individual. However, they preserved the larger status quo and did not disrupt social or industrial relations as technological revolutions have historically done. 

Nevertheless, there has always been a latent demand in India for technologies that don’t just mobilise individuals but also act as “playgrounds”, creating and connecting livelihoods. When management guru Peter Drucker visited post-Emergency India in 1979, Prime Minister Morarji Desai sold him hard on “appropriate technology”. India, Drucker wrote, had switched overnight from championing big steel plants to small bullock carts. Steel created no new jobs outside the factory, and small technologies did not improve livelihoods. Instead, he argued, India ought to look at the automotive industry as an “efficient multiplier” of livelihoods: beyond the manufacturing plant, automobiles would create new sectors altogether in road building and maintenance, traffic control, dealerships, service stations and repair. Drucker also pointed to the transistor as another such technology. Above all, transistors and automobiles connected Indians to one another through information and travel. Drucker noted during his visit that the motor scooter and radio transistor were in great demand in even far-flung corners, a claim that is borne by statistics. These, then were the civic technologies that mattered, ones that created playgrounds in which many could forge their livelihoods. 

The lionisation of jugaad is an attitudinal problem, and may not change immediately. But the task of creating a new generation of civic technologies that act as playgrounds can be addressed more readily.  In fact, it is precisely during crises such as the ongoing COVID-19 pandemic that India acutely requires such platforms.


Consider the post-lockdown task of economic reconstruction in India, which requires targeted policy interventions. Currently, the Indian government is blinkered to address only two categories of actors who need economic assistance: large corporations with their bottom lines at risk, and at the micro-level, individuals whose stand to lose livelihoods. India’s banks will bail out Big Business, while government agencies will train their digital public goods — Aadhaar, UPI, eKYC etc — to offer financial assistance to individuals. This formulaic approach misses out the vast category of SMEs who employ millions, account for nearly 40% of India’s exports, pull in informal businesses into the supply chain and provide critical products to the big industries.

To be sure, the data to identify SMEs (Income Tax Returns/ GSTN/ PAN) exists, as do the digital infrastructure to effect payments and micro-loans. The funds would come not only from government coffers but also through philanthropic efforts that have gained steam in the wake of the pandemic. However, the “playground” needs to be created — a single digital platform that can provide loans, grants or subsidies to SMEs based on specific needs, whether for salaries, utilities or other loan payments. A front-end application would provide any government official information about schemes applied for, and funds disbursed to a given SME.

Civic technologies in India have long been understood to mean small-scale technologies. This is a legacy of history and politics, which policymakers have to reckon with. The civic value of technology does not lie in the extent to which it is localised, but its ability to reach the most vulnerable sections of a stratified society like India’s. The Indian government, no matter how expansive its administrative machinery is, cannot do this on its own. It has to create “playgrounds” — involving banks, cooperative societies, regulators, software developers, startups, data fiduciaries and underwriting modellers — if it intends to make digital technologies meaningful and socially relevant.  

Please Note: A version of this was first published on Business Standard on 17 April 2020

About the author: Arun Mohan Sukumar is a PhD candidate at the Fletcher School, Tufts University, and a volunteer with the non-profit think-tank, iSPIRT. He is currently based in San Francisco. His book, Midnight’s Machines: A Political History of Technology in India, was published by Penguin Random House in 2019

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When one door closes…

An inspiring effort in response to COVID-19

Last Tuesday, for the first time in recorded history, India pulled the emergency brakes on all of the complex interactions that make up the economy and society of 1.3 Billion Indians.

We’re going to see a lot more cascading effects of bringing almost all economic activity to a sudden and near-complete stop. Some of those effects are already visible and others will reveal themselves over time. One thing that’s easy to predict is that this disaster, like most others, will affect Bharat more than it does India.

However, at iSPIRT, we remain impatient optimists for Bharat. It does not suffice for our volunteers to simply predict the future; we want to help create it. When the lockdown hit, we could immediately see that the country’s messy supply chains would be hard-pressed to disentangle essential services from non-essential ones. On the very first day of the lockdown itself, you may have seen videos or news about the police using their lathis on innocent essential service providers like doctors.

This is undeniably tragic, but at its heart is an information and social trust issue inherent in India. When you distil the problem, it comes down to how does the administration identify those travelling for essential-services vs those who are not. Consider this, Swiggy and Zomato alone – who only work on the last mile of one category of food – claim to have a fleet of close to 500,000. For the entire supply chain, even restricted to essential items only, will require authorisations for millions of people and another few million vehicles.

So today, we’re announcing the release of an open-source tool called, ePass. ePass is a tool to help the administration issue digital lockdown passes. These e-Passes are secure and can be verified when needed. iSPIRT got this solution going from zero to launch in less than 4 days. In the following interview, Tanuj Bhojwani speaks with Sudhanshu Shekhar, who led the effort to build the tool and Kamya Chandra, who helped liaison with the Karnataka administration.

Tanuj Bhojwani: Hey Sudhanshu, let’s start with what e-Pass is?

Sudhanshu Shekar: Sure, so the objective is to make sure that those who are on the road providing essential services or regular citizens seeking them can face minimal friction from the authorities.

We imagine a simple 4-step flow

  1. Individuals, such as you or me, or businesses providing essential services, can apply for a pass.
  2. The administration sees these requests digitally, and can authorise them from the backend, either manually or via automated rules.
  3. People can download their digitally signed passes on their devices
  4. The on-ground personnel, such as the police, can verify the curfew pass is valid by scanning it.

We’ve built tools for each part of that flow.

When we started working with the administration, they gave another great suggestion. If the beat officers could provide pre-authenticated “tokens” – like a gift-code, we could make this process even more convenient for some essential service providers. For example, they could distribute tokens to all the informal businesses in a mandi in one go, helping bring the supply-chain back online that much faster.

Tanuj Bhojwani: And you’ve made this open-source. How can a local administration use this?

Kamya Chandra: Everything is a configuration. The administration will have to decide who the approving authorities are. An admin dashboard allows bulk uploads, approvals, tracking statistics of issued passes, etc. It also allows them to configure timings, the validity of the pass, which identity fields are required, etc.

And finally, they have to instruct their beat officers to download the verification app and use it.

Tanuj Bhojwani: so the local government hosts this themselves?

Sudhanshu Shekar: Yes, the governments need to host this themselves, either directly or through a service provider. As iSPIRT, we have only provided the code and will not be providing any managed services. Even the code is open-sourced for others to use and remix as they see fit.

Tanuj Bhojwani: iSPIRT doesn’t work with the Karnataka administration normally, so how did this all happen? How did the team come together?

Sudhanshu Shekar: Sharad called me at 8 pm Tuesday or Wednesday? Maybe it was 8 in the morning. I’m no longer sure. What’s a day anyway? *laughs*

Kamya Chandra: I want to interrupt here and say I am super impressed by Sudhanshu and the rest of the team. No matter how little sleep they got, they didn’t let it affect their judgement or mood. Their decisions were always geared towards what’s the best that’s needed.

Sudhanshu Shekar: Thank you. We’re all just doing what we can.

But basically, on Monday, as Karnataka started enforcing curfew, we realised that people are going to need curfew passes. We started kicking around the idea on Monday, but there was no team. The next night the PM announced a nation-wide lockdown. We knew this was going to be a problem everywhere.

On Wednesday, the Karnataka administration also got in touch with Sharad asking for a similar solution, and they made it clear they need the solution in two days.

Sharad called and said, “I’m going to ask you about something, and you’re going to want to do it, but be really sure and think about it. This is a hard project and has very tight timelines. Everybody will understand if you say no”.

Sharad was right, I did want to do it, so I said yes and immediately got to work. I reached out to several friends and iSPIRT volunteers for help and a few – namely Mayank, Manish, Vibhav, Mohit and Ashok – agreed to help. It was easy to convince everybody, given the importance of fighting COVID. Manish has a few friends in China and was very aware about the seriousness of this situation. We quickly agreed on the basic product outline and started working. Wednesday was a flurry of activity and we got frequent reviews done with the Administration.

We realised we needed an admin console for the police to manage pass issuance. None of us was really an expert in building front-end applications and therefore, I started making calls trying to find an expert. Through referrals, I managed to reach Vishwajeet at 12 pm. I spoke to him about the project, its importance and the strict timelines. I told him we’d fail without him!

Tanuj Bhojwani: So you called a guy you’ve never met and asked him to deliver a complex task, on a ridiculous deadline for no pay nor any certificate or recognition. How did he respond?

Sudhanshu Shekar: He called his office to take a holiday. Vishwajeet sat down, worked for 15 hours straight, and delivered before time!

Kamya Chandra: *laughs* I want to add that this team, which did not know each other, did sleep shifts – including Vishwajeet, who became a volunteer that afternoon. I remember Sudhanshu taking turns with the devs to sleep at night in 2-hour batches just to keep the engine going. I’d run demos with the administration for feedback in the morning, while they all got a little shut-eye. From afternoon, they’d repeat another day and night of development.

Tanuj Bhojwani: Wow, that’s a lot of effort, and what sounds like very little sleep! What was happening on the police end, Kamya? 

Kamya Chandra: Honestly, I went in with a negative impression of the police and administration – because all you see are videos of people being beaten. However, I was very impressed with the few people I was working with. They were very knowledgeable about the challenges they were going to face operationally. Also, it was obvious they were doing their best. The first call I got from them was at 11.45pm!

They made time for our demos, gave excellent, considered feedback on all of it that has definitely helped the product. For example, we added a quick and easy way to verify the ID alongside the QR, so that it can work even if the beat policeman verifying does not have a smartphone.

All of this was happening by a remote team in lockdown. I was in Delhi talking to officers in Karnataka. Other than Sudhanshu, I’ve never met any of the other volunteers! In every other organisation, this kind of a crisis response doesn’t happen as smoothly even if the team knows each other. Anywhere else, it would have been near impossible if the team didn’t know each other.

Tanuj Bhojwani: Oh! I assumed they were all from Bangalore?

Sudhanshu Shekar: No.

 Mayank is in Bundi, a small town in Rajasthan. Kamya is in Delhi. I’m in Indiranagar, Bangalore. Ashok, our design guy, is in Koramangala and Mohit – I have no idea where he stays – I have never met him *everyone laughs*

Kamya Chandra: Knowing everyone’s location is harder, we still don’t know full names! One of the volunteers who helped us test the security of the product was Sasi Ganesan. I spelt his first and last name wrong in the first email I sent to him! He still helped though. On the 4th day of working together, I needed everyone’s last names, I still only knew Sudhanshu’s and Sasi’s!

Compared to the places I’ve worked before, I was surprised to see Pramod send an email with such savage truths. That’s a great example of how radical candour works, why it is in direct opposition to corporate culture.

Tanuj Bhojwani: *laughs* What were the “savage truths” in this email?

Kamya Chandra: To be fair to Pramod, it was more surprising than savage. Pramod said DO NOT GO LIVE (in bold and underline) until security and related aspects weren’t complete. The contents weren’t particularly shocking, but that he sent it to all of us – including people he barely knew. There was no secrecy or pretending to be bigger than we are. All our failures were also publicly available to a team we’ve never worked with before or met. It’s quite a unique experience.

Sudhanshu Shekar: Yeah, we were planning on going live on Friday, and we knew we needed to do security testing before we went live. Pramod’s email was a good one, and all fair asks about security, usability and data retention. He connected us to another iSPIRT volunteer, Sasi Ganesan for help. Ten hours before the scheduled launch, Sasi wrote back with a list of tasks we must do BEFORE we go live. This Thursday night email doubled our todo list. Thankfully, we were able to pull in Bharat, Sireesha and a few others from Thoughtworks to help close these tasks But at the time it felt brutal, we realised this was going to be a very hard few hours.

Kamya Chandra: Yeah, I think this is around the time Rohit started helping us enhance our UX. To me, this email was a clear indication of the high bar every iSPIRT volunteer must meet. Tight timelines or urgent needs are not enough to excuse sloppiness. I am glad we have senior volunteers such as Pramod to keep the bar high.

Tanuj Bhojwani: But I believe this story has a twist?

Kamya Chandra: Well, we did the demos in time, and everyone seemed very impressed. Unfortunately, the Karnataka administration decided to go with someone else. Their decision to go with someone else was disappointing for us.

However, they are policymakers making scale decisions. They probably had to keep many balls in the air and have redundancy. It’s good they have backup plans for backup plans.

They handled it with grace and were very kind about it. They sent a thank you and a commendation letter to each of our volunteers. One of the senior lady officers asked me – do you only take techies? I do not have a computer science degree, but I want to volunteer!

I told her I was an economist too and that she should definitely volunteer.

Sudhanshu Shekar: For me, the toughest part was when I heard the news that our work won’t be going live on Friday like I had promised all these guys. I was really sad. For about an hour, I tried to fight the decision, but then I realised that I would have to do the difficult thing and break the bad news to a bunch of volunteers who’ve slept less than 6 hours total in the last 72 hours.

What happened next is what surprised me the most about this whole thing.

All of them – every single one – took it so well! They all said something to the effect of working on a solution with other volunteers felt better than not working on one and worrying about the lockdown.

I thought this is the end of the line, but it was they who cheered me up and suggested we should open-source it. I was hoping to tell the volunteers to get some rest. Instead, these guys were so passionate that they worked for a couple more days to complete the documentation, which is why we were able to launch ePass today!

Tanuj Bhojwani: Wow. That’s quite a lot of team-spirit for a team that has never even met! So what happens now that this is open-source? How do you expect it will get traction?

Kamya Chandra: The decision to open-source paid off! Even though Karnataka didn’t take ePass, the officers messaged their batchmates and told them about what the volunteers did.

Sudhanshu Shekar: Now, we have demos scheduled with several other state governments as well as a few national ministries. We think this could be live in at least a couple of places soon.

Tanuj Bhojwani: That sounds like a fairy tale ending. Do you have any advice for anyone who is reading this and wants to volunteer?

Kamya Chandra: I used to work at the World Bank in DC, and we were trying to implement national-level digital systems in many countries. When we had technical challenges there, I was often told to get on a video call with iSPIRT volunteers for guidance and inputs. The more I interacted with them, the more I realised there is magic here to learn from. So I gave up my diplomatic passport and got on a plane to Bangalore!

So my advice is that you should try volunteering even if you’re many, many oceans away!

Sudhanshu Shekar: *laughs* I have a more straightforward test than Kamya’s for those who want to volunteer. These are also the three reasons I volunteer.

First, Societal Impact. You feel useful because you get to work on something that genuinely helps people.

Second, exposure to a wide variety of topics – such a different set of problems – you don’t exactly stick to your lane. Hence, you also meet people with very diverse backgrounds and work experiences. Because my peers are not age-bracketed with me, I feel like there are many lessons that I usually would’ve learned in ten years of my career, I’ve learned already at iSPIRT. 

Third, you draw energy from others’ passion. It’s just amazing to go to work with people like this every day. I’ve realised iSPIRT is a self-selecting group – it’s only the people who seek to find it, find it. It is not easy to be a volunteer, because the environment is open and the volunteers are self-driven, people will clearly be able to see if you can walk the talk. When you have people respected in a system not for who they are, but what they do, it is magical for everyone.

Tanuj Bhojwani: That is very true. Thank you for the chat!

Like Sudhanshu says, Volunteering at iSPIRT is hard and definitely not for everyone. However, if one or more of these reasons resonate with you, you should read the volunteers handbook to learn more about balloon volunteering.

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Union Budget 2020: A Good Start That Needs Swift and Decisive Action


 “Words can inspire but only action creates real change.” 

Presenting the second Union Budget, the Finance Minister asserted that entrepreneurship has always been the strength of India and proposed a number of measures and policy changes to help boost the Indian startups. The Budget was a step in the right direction, but these are just baby steps for an economy that needs giant leaps to become an innovation hub. 

We are also hopeful that the investment clearance and advisory cell will go a long way in strengthening the startup environment and improve the ease of doing business within our community. The proposed 5-year deferment of tax payments on ESOPs by startup employees in the Union Budget, we believe, is a step in the right direction. However, it does not satisfactorily address the complete concerns and other pain points that have been plaguing the startup ecosystem. 

Firstly, the ESOP taxation change, in its current form, applies only to around 200 startups recognised by the IMB (Inter-Ministerial Board), thereby, severely restricting its scope. It is only fair that all DPIIT-registered startups enjoy the benefits of the proposed changes equally. Secondly, we strongly believe that ESOP taxation must be revised as per global norms, else, it would become an ineffective tool of talent acquisition and retention. 

We also require cohesive measures towards improving the ease of doing business and strengthening the overall ecosystem. To ease the working capital crunch faced by startups, a lowering of TDS rates on payments to DPIIT registered startups and MSMEs is necessary. To enable greater rupee capital participation, allowing universities and public trusts to invest in Alternative Investment Funds (AIF) will make a considerable impact. Achieving tax parity between listed and unlisted securities, which at present vary significantly, will enable startups to attract greater investments. The provision of R&D benefits for companies will help spur innovation and startup activity in India, enabling a structural shift in the economy towards building high-value capabilities. 

We believe that more cross-cutting measures across industries are necessary and so is the reduction of frictions between the businesses and government players. This will help us to cover more ground in fulfilling the mission of making India a high-value, innovation economy. 

Overall, Union Budget 2020 does reflect the Government’s keenness in improving the ease of doing business but considering that the lofty goals we have set out to achieve, good intentions and keenness do not suffice. These must be augmented with robust policy changes, as well as, swift and decisive action to strengthen and accelerate the startup ecosystem. 

India is at a crossroads and must decide how she is going to traverse the next decade and champion the change the world needs. It reminds one of Robert Frost, “Somewhere ages and ages hence:

Two roads diverged in a wood, and I—I took the one less travelled by,

And that has made all the difference”

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Union Budget 2020 – iSPIRT Recommendations

India is among the top startup ecosystems in the world with home to 50,000+ startups and 3,500+ funded startups growing at a rapid pace at 30 per cent. While the future outlook of the Indian startup ecosystem is definitely promising, further accelerated growth can happen only if the government introduces more startup-friendly policies, other than the existing support under ‘Startup India’.

With Budget 2020 less than two months away, the startup ecosystem is hoping to get a major boost with respect to the following measures:

  • Improve ease of doing business for startups.
  • Attract domestic and foreign investors.
  • Increase working capital flow for startups.

iSPIRT has made a 13-point recommendation list for Budget 2020 with respect to the above-mentioned measures:

1. Remove the TDS payment for DPIT registered Startups

Currently, payments to DPIT registered startups are subject to Tax Deduction at Source (TDS) of 10% under section 194J. It takes at least 1-2 years for startups to get refunds after filing of their returns, which blocks their working capital for that time period. 

2. Harmonise the Tax Rate and Holding Period between Listed and Unlisted Securities of Startups 

The higher holding period and higher tax rate disincentivise investments into startups from Indian sources. Globally, no such differentiation exists.

This recommendation seeks:

  • Reduction of the holding period for unlisted securities to 12 months from the current 24 months.
  • Levy of a lower tax rate of 10% on the sale of unlisted securities.
  • Removal of the “superrich” surcharge of 25%/37% on the sale of unlisted securities.

3. Change in the taxation of ESOPs for Startups:

The existing definition of Rule 3(8)(iii) of the Income Tax Rules, 1962 does not take into consideration the discrepancies in the determination of ‘Fair Market Value’.

The new recommendation seeks amendment to this rule as as per Rule 11UA(1)(c)(b), provided such fair market value shall not be less than the exercise price.”

4. Clarification on the February 19th, 2019 DPIIT circular on “Angel Tax” with regard to Form 2

This circular states that the exemption lapses in the case the startup has or will invest or conduct any of the activities below for a period of 7 years after investment, inter alia:

  • Make capital contributions to other entities, 
  • Make investments in shares and securities, 
  • Give loans and advances (except in the case of lending startups

The recommendation seeks an amendment to this notification

  • Extend the “business model” test applicable to all the other investments mentioned in Form 2 to all points mentioned therein
  • Allow Startups to make Loans and Advances in the ordinary course of business provided that the PAN of the recipient is reported
  • Allow startups to invest into shares and securities and make capital contributions provided that such downstream investments do not make further investments into any of the other points listed in Form 2

5. Allow for AIF expenses to be capitalised/passed-through

Expenses of an AIF can add up to up to 25%-30% of its corpus during the lifetime of a scheme, making a large chunk of the fund is a “dead-loss”.

The new recommendation seeks AIF expenses to be capitalised as the Cost of Acquisition or allowed to be set off against the income.

6. Classification of securities held by AIFs as Capital Assets by amending section 2(14) of the Income Tax Act, 1961.

There is still friction between the startups, investors and income tax department with respect to taxation of short-term gain from the sale of securities under AIF.

The new recommendation seeks an amendment to Section 2(14) as “any securities held by a Foreign Institutional Investor or AIF which has invested in such securities in accordance with the regulations made under the SEBI. 

7. Pass-Through Status for CAT III AIFs

Unlike CAT I and CAT II AIFs, CAT III AIFs do not have pass-through tax status, rendering their income to be taxed at the maximum marginal rate for their income earned, regardless of the tax status of the underlying investor.

The new recommendation seeks an amendment to Section 115UB and Section 10(23FBA) by including CAT III AIFs.

8. Allow Universities and Public Trusts to invest in AIFs

Currently, investments are allowed in SEBI registered Mutual Funds or notified Mutual Funds set up by a public sector bank or a public sector financial institution.

The new recommendation seeks an amendment to this section to include ‘Units of an Alternative Investment Fund registered with the Securities and Exchange Board of India”

9. Notify all SEBI registered AIFs as “long-term specified assets” under section 54EE

Section 54EE was introduced on April 1, 2016, to give capital gains exemption of Rs 50 lakhs for any gains invested into “long-term specified assets”, defined as “a unit or units, issued before the 1st day of April 2019, of such fund as may be notified by the Central Government in this behalf”

So far, the Central Government hasn’t notified any such funds, so no tax-payer has been able to avail of this benefit.

The new recommendation seeks issuance of a Central Government notification to notify all SEBI registered AIFs as “long-term specified assets” under section 54EE and announce measures to extend this to April 1, 2025.

10. Time-bound response from the Inter-Ministerial Board (IMB) and allowing all startups to reapply

The IMB has not been effective yet in timely responses to startups.

The new recommendation proposes DPIIT to issue a notification stating that:

  • IMB will respond in 60 days from the date of submission by the Startup.
  • Startups who were denied IMB recognition prior to February 19th, 2019 can re-apply for IMB recognition once again under the new criteria.

11. Exempt Software product Companies from Softex

Software product exporters are required to file SOftex form to report the inward remittance on export invoices in convertible foreign currency. However, Software products have a publicly listed MRP/List price and hence do not require any valuation.

The new recommendation seeks RBI to exempt software product companies from filing Softex and create a separate category of Purpose code for disposal of inward remittances by authorised dealers.

12. Creation of aHSN code for Software Product Startups

Under the GST regime, all IT Software has been treated as “Service”.  Yet, there exists HSN codes and SAC codes both. 

It is recommended that an HS code classification for specific categories can be issued using the last 2 digits (first 6 Digits being defined under international system). 

13. R&D Credits for Software Product Companies 

As startups and young software product companies don’t have taxable profits, they are unable to take advantage of current R&D tax benefits that involve setting off R&D expenses against taxable profits. To overcome this limitation, they should be allowed a deferred tax credit for up to 7 years after the R&D investment.

You can read about Budget Representation 2020 in detail here.

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Announcement: iSPIRT Foundation & Japan’s IPA to work together on Digital Public Platforms

Information-technology Promotion Agency, Japan (IPA), Japan External Trade Organization (JETRO), and the Indian Software Product Industry Roundtable (iSPIRT) have shared common views that (i) our society will be transformed into a new digital society where due to the rapid and continued development of new digital technologies and digital infrastructure including digital public platforms, real-time and other data would be utilized for the benefit of people’s lives and industrial activities, (ii) there are growing necessities that digital infrastructure, together with social system and industrial platforms should be designed, developed and utilized appropriately for ensuring trust in society and industry along with a variety of engaged stakeholders and (iii) such well-designed digital infrastructure, social system and industrial platforms could have a great potential to play significant roles to improve efficiencies of societal services, facilitate businesses, realize economic development and solve social issues in many countries. 

Today, we affirm our commitment to launching our cooperation and collaboration through the bringing together of different expertise from each institution in the area of digital infrastructure, including mutual information sharing of development of digital infrastructure, in particular, periodic communication and exchange of views to enhance the capability of architecture design and establishment of digital infrastructure. We further affirm that as a first step of our cooperation, we will facilitate a joint study on digital infrastructure, such as (i) the situation of how such digital infrastructures have been established and utilized in India, Japan and/or other countries in Africa or other Asian regions (the Third Countries) as agreed among the parties, (ii) how the architecture was or can be designed for digital infrastructure as a basis for delivering societal services in the Third Countries and (iii) what kind of business collaboration could be realized, to review and analyze the possibility of developing digital infrastructure in the Third Countries through Japan-India cooperation. We may consider arranging a workshop or business matching as a part of the joint study to figure out realistic use cases.

Our cooperation is consistent with the “Japan-India Digital Partnership” launched between the Ministry of Economy Trade and Industry, Government of Japan and the Ministry of Electronics and Information Technology, Government of India in October 2018. We will work closely together and may consider working with other parties to promote and accelerate our cooperation if necessary.

For any clarification, please reach out to [email protected]

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Indian Software Product Registry – All That Product Companies Need to Know

Earlier this year, National Policy on Software Products was rolled out to create a robust, participatory framework to bring together industry, government and academia on a common platform to make India as a global hub for software products development. This is a much-needed initiative to provide holistic and end-to-end support to the Indian software product ecosystem. The registry is the first step among many towards solving the real problems of the industry and nurturing the software product companies. If done right, this initiative will have immense potential and far-reaching impact to benefit the industry.

Under this policy, one of the key initiatives is the set-up of the Indian Software Product Registry (ISPR) through industry ownership. It is a collaborative platform which will act as national coordination, facilitation and inter-connected centre for all activities related to the Indian software product ecosystem.

The main purpose of this policy is to focus towards the promotion of Indian software products which are defined as under for implementation:

  • Indian Company: As per sub-section 26 of section 2 of the Income Tax Act, 1961, “Indian company” means a company formed and registered under the Companies Act, 1956 or Companies Act, 2013,  provided that the registered office or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is in India.
  • Indian Software Product Company (ISPC):  An ISPC is defined as an Indian company in which 51% or more shareholding is with Indian citizen or person of Indian origin and is engaged in the development, commercialisation, licensing and sale /service of software products and has IP rights over the software product(s).

ISPR aims to create a platform to enable discovery of Indian Software Product Companies and their products while simultaneously giving automatic access to the Government e-Marketplace (GeM) platform. This will enable the government to identify Indian companies as part of their buying process. However, more work on specific allocation of government buying and redeveloping of RFP’s in government for products will also be initiated so that the government can finally buy Indian products.

Secondly, by listing on exchange on ISPR will enable MEITY to get a better understanding of the industry so that specific product-related interventions like recurring payments for SaaS companies, credits for R&D to enable Indian companies to invest in research and development, and facilitation of Indian software product industry for providing fiscal incentives, if any, at a later stage among others will also be achieved.

Thirdly, ISPR will also enable Indian Software Product Companies to list their products here and connect to buyers across the world. Since this is a government-backed platform, it provides a high level of trust and authenticity in the global market. 

Indian Software Product Companies can register here.  For any more queries, please feel to reach out on [email protected].