In this article, Sandip Ghosh, a student pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the Startup India program started by DIPP.

Introduction

A startup company is an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing a viable business model around an innovative product, service, process or a platform. The concept had been introduced in India on 16th January 2016 by the Government.

About DIPP (Rules and Functions of the Department)

The Department of Industrial Policy & Promotion was established in the year 1995 and has been rebuilt in 2000 with the merger of Department of Industrial Development. The primary rules and functions are as follows:

1. It formulates and implements the Industrial policies in conformity with the industrial needs and national objectives.
2. It provides advice to all technical and industrial matters and monitors the growth of industries specifically assigned to it.
3. Formulation of Foreign Direct Investment (FDI) policy and promotion, approval and facilitation of FDI.
4. Providing encouragement to foreign technology collaboration at an enterprise level and prepare policy matter for the same.
5. Prepare the policy related to IPR (Intellectual Property Right) – Patents, Trademarks, Industrial Designs and Geographical Indications of Goods and administration of regulations.
6. Administration of Industries (Development & Regulation Act), 1951.
7. Promoting Industrial development to the Industrial backward areas especially North-East region including international cooperations for Industrial Partnership.
8. Promoting productivity, quality and technical cooperations.

Definition of a start up by DIPP

As per DIPP startup means an entity, incorporated or registered in India which fulfils the following criteria:

1. The period must not exceed seven years from the date of incorporation and in case of Biotechnology sector, it is up to 10 years.
2. It can be incorporated as private limited company or registered as a partnership firm or a limited liability partnership.
3. The annual turnover must not exceed INR 25Cr for any financial year since incorporation/registration.
4. It should work towards the innovation, development or improvement of products or processes or services, or it is a scalable business model with a high potential of employment generation or wealth creation.

Exclusion

Any company formed after splitting up from existing business shall not be considered as ‘Startup’.  

For recognition of your startup

Under the Startup India Action Plan, startups that meet the definition as prescribed under the notification G.S.R 364(E) are eligible to apply for the recognition under the programs.

Startups can also apply for exemptions on profit under the Section 80-IAC of Income Tax Act and exemption on investment above fair market value under Section 56of Income Tax Act.

The Documents required for recognition of the Startup:

• Company Incorporation;
• Company Registration with the Income Tax-Pan, Tan, VAT and GST;
• If the proposed business is Software development only for Exports, then the Company should be registered with the Software Technology Parks, India;
• If the proposed business is related to manufacturing then different requirements are to be met with;
• If the business is related to the services sector, the law will be different;
• A company has more than 20 employees must have to register with the provident fund;
• Shop and establishments must be registered with the local authority;  
• If the company is involved with export and import must have the necessary registration;
• Employee-related legal documents;
• Investor related legal documents;

Please find the benefits offered to recognized startups here.

How to register your Startup Business with Startup India

The registration of the startups is very short and simple. One must login to https://www.startupindia.gov.in/registration.php and follow the steps given in the same.

New Definition of startup by DIPP and its requirement for changes

On the early stage, despite of year of its launch, there is no significant progress seen because of the stringent norms and regulations. Up to May 2017, DIPP could only recognize 798 applicants as startups and only 10 of those have availed the tax benefits.

Initially during innovation was proposed as the base of any entity being considered a startup. The entity to be identified as start up as per the earlier definition given.

In recent time, Government of India has further enlarged the definition of “Startup India, Standup India” initiative introduced in January 2016. From now on the overall age limit has been increased from five to seven years and has been further extended to 10 years for biotech startups.

In March 2017, The Department of Industrial Policy & Promotions (DIPP) had invited feedbacks and suggestions from various industries in India in order to alter the definition of the startups.

The Changes that are infused in the definition of Startup and its policy are as follows

1. The Government had announced to take job creation capabilities and financial standards of the Startups as a measure to gain benefits from startup India plans.
2. The tax rates of SME’s with an annual turnover up to $7.6Mn are reduced to 25%. Further to this Government with effect from April 2018 has allowed carrying forward and setting up the loss of startup for seven years.
3. For obtaining tax benefits startups are not required to get a letter of recommendation from an industry association.
4. Companies that are incorporated after March 2016 can now avail a tax holiday of three years of their seven years of existence, earlier the limit was three years out of five years.
5. The Government will provide startups with 80% rebate while filing of patents vis-à-vis other Companies. This will help the companies in their initial year of formation.

These changes are made to ease of starting up a new business to promote the startup ecosystem and build a nation of job creators than job seekers.

Apart from putting relaxation on setting up the process, Government has moved one step ahead to fast-track the activities. For instance, as per the latest report on April 15, 2017, panels of 423 facilitators for patent design applications and 596 facilitators for Trade Mark application has been created for providing assistance in the filing of IP applications and to make the process faster for filing and acquisitions.

As mentioned above, in the recent years, Government of India has introduced several measures to help the startup ecosystems including amending the definition of the Startup that will definitely help in addressing few burning concerns by encouraging indigenous development and talent.

Discussion with DIPP secretary Mr. Ramesh Abhishek tells that how the above-mentioned change points have boosted the startup registration. See here.

List of entities recognized by DIPP as a startup can be accessed here

Conclusion

This initiative by the Government of India has created a new dimension to the entrepreneurship by helping the newcomers in setting up their business as well as makes a live network of startups through the connection. This is a platform provided by the Government to the highly skilled professionals who can generate new jobs and fulfill the dream of developed India by the year 2022 with the availability of house, electricity and all other basic needs.