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Centre mulls modifying definition of start-up

Chanakya IAS Academy

A proposal is being considered by the central government which is aimed at amending the definition of startup. It also plans to review benefits for startups that were rejected earlier.

The Secretary of the Department of Industrial policy and promotion(DIPP) while addressing an event organized by Indian private equity and venture capital association remarked that the government is flexible in this regard.

He even cited feedback that the government has received from entrepreneurs, that the definition of startup in the startup policy hampers their ability to claim benefits.

Current provisions in the Startup India policy:

For claiming benefits of government schemes:

  • Startup should be an entity, incorporated or registered in India not prior to five years
  • Annual turnover not exceeding Rs.25 crore in the preceding financial year
  • Working towards innovation, development and commercialization of new products and processes that are driven by technology or intellectual property

Suggestions from the industry:

  • The biotechnology and medical devices sector seek to enhance the relaxation period of claiming benefits from five years to eight to ten years, as more time is needed to attain financial stability in this sector
  • Instead of turnover, the number of employees or investment made should be considered in the policy

Bharat Navodaya: StartUp India Reform Report:

  • The existing definition should be simplified
  • The revenue threshold limit for availing benefits as a startup should be raised
  • Subjectivity should be removed
  • The current process which involves an additional layer of approval from the Inter ministerial board should be dispensed with.
  • Instead startups should be certified automatically upon approval from pre- designated bodies
  • Single window clearance for obtaining approvals and licenses from all departments

The proposal of the government:

  • The criteria of innovation would be retained as it helps to differentiate between a traditional firm and a startup
  • The definition of startup will be made more broad based
  • The government is considering to review applications that were earlier rejected
  • Only ten applications have been approved for availing tax benefits
  • This low number has made the review of the existing policy essential
Read 1215 times Last modified on Tuesday, 07 March 2017 11:49

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