Govt may fine tune crypto tax rules; 5G windfall for IT firms

By Kevin Colleran On Feb 7, 2022

India’s new crypto tax isn’t just exorbitant, it’s also terribly confusing. Now, sources tell us the government may fine tune the tax rules and also widen the definition of “virtual digital asset” to account for rapid changes in this ever-evolving space.

Also in this letter:

IT firms to benefit from budget’s 5G push
County Delight in talks to raise $90-100 million
PE firms went on a hiring spree in 2021

Govt may widen definition of digital asset and fine tune tax rules

The government may broaden the definition of “virtual digital assets” to cover any new assets that may emerge in this space, sources told us.

It could also fine-tune the rules proposed in the budget to tax virtual digital assets after holding discussions with industry representatives and to account for the dynamic nature of the sector, officials told ET.

Catch up quick: The budget for FY23, announced last week, proposed a flat 30% tax on income from any “virtual digital asset”. The tax will come into force on April 1.

It also defined the term “virtual digital asset” to mean any information, code, number or token, generated through cryptographic means or otherwise, that provides a digital representation of value, or functions as a store of value or a unit of account, and can be transferred, stored or traded electronically. “Non-fungible tokens and any other token of similar nature are included in the definition,” it stated.

Widening the net: “We want to ensure that the definition is dynamic enough to cover any new product that comes by due to technological changes…This sector is seeing many new products in a short time,” a senior government official told ET.

Concerns: Experts have pointed out that peer-to-peer (P2P) or wallet-to-wallet transactions may escape this tax. Some policymakers are also concerned that the proposed tax rules may allow for laundering black money through the provision for tax on gifted crypto assets, people privy to the discussions said.

Tax officials, however, said while the income tax department would collect the tax, other agencies could question the recipient on the source of the gift as information on the gifted crypto assets would be captured in the income tax return.

However, another industry expert said this would not apply to gifts given prior to April 1.

IT services firms to benefit from budget’s 5G push

Indian IT services providers including TCS, Infosys, Tech Mahindra and HCL Technologies are expected to benefit hugely from the budget’s thrust on 5G technology, senior executives and industry experts said.

The government’s plan to hold 5G spectrum auctions and roll out services in 2022-23 could lead to a significant jump in real-time engagements and business opportunities for these firms. They are already investing and co-innovating with telecom operators, they said.

Solutions around 5G technology form around 8% of existing engagements for IT services firms globally. Accenture, Capgemini, TCS, HCL Technologies, Tech Mahindra and Infosys are the leading IT companies in this space, according to a report from Everest group.

In addition to commercial 5G engagement, enterprise 5G solutions—where IT firms can participate—will help generate $200 million worth of revenue for communication service providers (CSPs) by 2026 in India, according to tech industry research firm IDC.

State of play: Telecom service providers like Bharti Airtel, Reliance Jio and Vodafone Idea (Vi) have set up 5G trial sites in all major metros such as Bengaluru, Kolkata, Mumbai, and Delhi along with smaller cities such as Jamnagar, Ahmedabad, Lucknow, Pune, and Gandhinagar.

IT service providers are increasing collaborations with telecom firms to tap the 5G opportunity. In December, Airtel and TCS announced the successful testing of use cases from TCS’ Neural Manufacturing solutions suite on Airtel’s 5G network. TCS is also exploring solutions with Indian telcos and the government to offer 5G mobile private networks.

As per the IDC telecom services tracker, India is expected to have 600 million 5G connections by 2025.

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County Delight in talks with PE firms to raise $90-100 million

Dairy brand Country Delight is in talks with private equity funds Temasek Holdings, Venturi Partners and Premji Invest to raise $90-$100 million, valuing it at $500-$550 million, three people with direct knowledge of the development said.

Other investors such as Trifecta Capital have also held discussions with the company, the people said. Existing investors such as Matrix Partners and Orios Ventures are also participating in the fresh funding round, they added.

The investment is expected to help Country Delight grow its grocery delivery business, an area where it will have to compete with other on-demand delivery services providers such as Blinkit (formerly Grofers), Fraazo, BigBasket, Swiggy Instamart, Dunzo and Zepto.

The Bengaluru-based firm had raised $25 million led by Elevation Capital in November 2020.

Covid boost: India’s direct to consumer (D2C) sector has seen a funding upsurge after gaining traction online because of the Covid-19 pandemic. The online groceries market has also accelerated since the start of the pandemic and platforms are now trying to woo users by promising deliveries in 10 minutes.

E firms went on a hiring spree in record-breaking 2021

Top private equity firms went on a hiring spree in 2021, bolstered by an all-time-high flow of funds, a buoyant public market and a record number of M&A deals.

At $63 billion, 2021 saw record inflows of private equity and venture capital monies. Fund managers beefed up their teams to make the most of the growing investment opportunity.

About 310 mid-to-senior level appointments were made last year, the highest in at least five years, according to data from executive search firm Native. This is up from about 200 moves in 2020, 165 moves in 2019, and just over a hundred each in the previous two years.

Quote: “The PE/VC Industry is in its best phase of investment activity and the demand for high quality talent across levels is at its highest,” said Sonali Puri, partner at Native. “We expect this year to be robust on talent churn and new funds expansion across asset classes and envisage an intense hiring activity across funds.”

What’s powering Good Glamm Group’s buying spree?

The Good Glamm Group, a direct-to-consumer beauty and personal care company, has emerged as one of the highest-valued businesses in the buzzy segment after two timely pivots and 10 quick acquisitions.

In the past 12 months alone, it has mopped up almost Rs 1,885 crore across three funding rounds and acquired nine brands — including Baby Chakra, The Moms Co, St Botanica, Organic Harvest, Sirona Hygiene, Miss Malini and ScoopWhoop — to become a house of brands.

The company, then, is a case study on how a content-to-commerce strategy — driving traffic through videos, blogs and posts and using that content as a marketing tool to push sales — can helped a startup win over top investors such as Prosus Ventures, Warburg Pincus, Accel, Bessemer Venture Partners and Amazon.

But questions linger on the integration of the brands it has acquired and whether the content-to-commerce model really works. Read on to find out more.

A clutch of Indian social networks seek to dethrone Facebook

In the 2000s, Orkut was the cool social network to be on. In 2022 it is at best a distant memory, thanks to Facebook. Now, a clutch of Indian social networks hope to do to Facebook and Instagram what Facebook did to Orkut all those years ago.

Uable is a social network for teenagers, Qlan for gamers and e-sport enthusiasts, and Swell and Leher for social audio listeners. These are some of the many desi social networks emerging in India, looking to challenge the monopoly of Big Tech using local knowledge and targeted products.

“We are the digital colony of Silicon Valley. The only way to disrupt the incumbents is to be ahead of them in noticing a behaviour change and technology,” Vikas Malpani, cofounder and CEO of Leher, said. (read more)