Centre mulling modifying definition of start-up
The Centre is considering proposals to amend the definition of ‘startup’ in the policy and looking to review applications seeking benefits of startup policy which were rejected, according to a top official.
“It (the definition) needs to undergo change. We (the government) are flexible,” said Ramesh Abhishek, Secretary, Department of Industrial Policy & Promotion (DIPP) citing feedback from entrepreneurs who submitted that the definition of startup in the policy hampered their ability to claim benefits. Mr. Abhishek was speaking at an event organised by Indian Private Equity and Venture Capital Association.
Mr.Abhishek was referring to the provision in the Startup India policy which states that for the purpose of claiming the benefits of the government schemes, ‘startup’ means an entity, incorporated or registered in India: (a) not prior to five years, (b) with annual turnover not exceeding ₹25 crore in any preceding financial year and (c) working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.
“There may not be any need to have a single time period (like five years) and turnover (like ₹25 crore) for all sectors. May be there is a need to have different time period and different turnover for different sectors,” said the official.
He said the government would retain the criterion of “innovation” as it is deliberately kept in the policy to differentiate between a traditional firm and a startup. However, he added the government would consider suggestions on making the definition of startup more broad-based. Mr. Abhishek said entrepreneurs from the biotechnology and medical devices sectors have informed the government of the need for relaxation of the five-year time period to eight or ten years as more time was required in such sectors for an entity to takeoff financially.
He said there were also suggestions that instead of ‘turnover,’ the policy should consider the number of employees in a firm or investment in plant and machinery.
On the reason for the government looking to review the applications that earlier sought benefits of the startup policy and were rejected, Mr. Abhishek said, “out of all the applications, only ten startups have been approved for availing tax benefit. I am concerned about this low number and have suggested the need for a review. The mechanism (of the Inter-Ministerial Board, or the IMB, considering the applications) is transparent.”
As per the DIPP, out of the 1662 applications received so far, only 146 applications can be considered for tax benefits as only these Startups have been incorporated after April 1, 2016.
It added, “out of the 146 applications, all have been considered by the IMB and 10 Startups have been approved for availing tax benefit.”
The ‘Bharat Navodaya: StartUp India Reform Report,’ released on Monday, suggested that the startup definition be simplified. “The revenue threshold should be raised; subjectivity should be removed and the additional layer of approval from the IMB should be dispensed with. There should be automatic certification of startups upon approval from a few pre-designated bodies,” it recommended. It mooted the establishment of a single window clearance for obtaining approvals and licences from all departments, adding that the frequency of filing under labour and tax laws should be reduced.
(Source: The Hindu)