Government reduces red tape to incentivIse start-ups
FollowThe government has eased the norms under which start-ups can seek benefits according to the Startup India Action Plan. Start-ups can now be eligible for benefits by simply receiving a certificate from the Department of Industrial Policy and Promotion (DIPP), compared with the earlier process of being vetted by an inter-ministerial board, said Nirmala Sitharaman, commerce and industry minister according to a report in the Business Standard.
Addressing the first conference of states organised by the DIPP on Saturday, Sitharaman said the new norms would allow more start-ups to receive benefits, while the government would be able to build a scalable model to spur growth in the new economy. Benefits include faster and cheaper patent examination and being eligible for the Rs 10,000-crore ‘fund of funds’. However, it was not clear whether the relaxed norms will be valid for availing tax benefits, which a lot of start-ups covet.
Led by Prime Minister Narendra Modi earlier this year, the Action Plan offers other incentives like exemption from stringent labour laws for three years, income tax holiday on profit for three years and self-certification for regulatory compliances.Till date, DIPP has received 782 applications from start-ups, seeking tax benefits. Of these, only 180 had the required documents — one of them being the incubator’s certificate on innovative business.
While 88 start-ups have been listed by DIPP as possible contenders for most benefits, so far only one start-up has managed to get the approval of the inter-ministerial board for tax benefits.
Officials at DIPP blamed the lack of awareness about the process and a dearth of incubators for this situation. Sitharaman announced that hand holding will be provided by DIPP to ensure that entrepreneurs know how to apply for the benefits.
Also, since only 278 government-approved incubators can certify and recommend start-ups, DIPP has certified 20 private organisations, including Nasscom and iSprit, as incubators under the Startup India Action Plan. The move will help in growing the reach of incubators for upcoming start-ups. Also, a cap of Rs 5,000 has been put on the maximum fee charged by incubators for providing letter of recommendation to start-ups.
Apart from mapping potential incubation centres across the country with a special focus on Tier-II and Tier-III cities, DIPP has asked states to suggest names of educational institutions for this purpose.
As part of the first states’ conference on the Startup India initiative, the Centre invited Gujarat, Telangana, Karnataka, Rajasthan and Kerala to present their work on start-up ecosystem.
India currently has the third-largest number of start-ups in the world. While there were more than four thousand technology-based start-ups, Sitharaman said the number was expected to reach 12,000 by 2020. The government has been hard-selling its start-up initiatives and Sitharaman revealed that she will be holding separate discussions with stakeholders in the start-up economy like venture capitalists, major founders, incubators, educational institutions and private equity funds over the next one month.
