BUSINESS

Centre mulls modifying definition of start-up

Head count:It has been suggested that instead of ‘turnover,’ the policy should consider the number of employees in a firm or investment in plant and machinery.

Head count:It has been suggested that instead of ‘turnover,’ the policy should consider the number of employees in a firm or investment in plant and machinery.  

The Centre is considering proposals to amend the definition of ‘start-up’ in the policy and looking to review applications seeking benefits of start-up 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 start-up 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 Start-up India policy which states that for the purpose of claiming the benefits of the government schemes, ‘start-up’ means an entity, incorporated or registered in India: (a) not prior to five years, (b) with annual turnover not exceeding Rs. 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 Rs. 25 crore) for all sectors. Maybe 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 start-up. However, he added the government would consider suggestions on making the definition of start-up 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 take off 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 start-up policy and were rejected, Mr. Abhishek said, “out of all the applications, only ten start-ups 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.”

Tax benefit

As per the Department of Industrial Policy & Promotion, out of the 1662 applications received so far, only 146 applications can be considered for tax benefits as only these start-ups have been incorporated after April 1, 2016.

It added, “out of the 146 applications, all have been considered by the IMB and 10 start-ups have been approved for availing tax benefit.” The ‘Bharat Navodaya: StartUp India Reform Report,’ released on Monday, suggested that the start-up definition be simplified.

‘Raise threshold’

“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 start-ups upon approval from a few pre-designated bodies,” the reform report recommended.

The study also 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.

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