START-UP DEFINED BY GOVERNMENT OF INDIA

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Business Mantra: Faridabad

Department of Industrial Policy & Promotion (DIPP) – Ministry of Commerce & Industry has given the definition of the word “Start-up” as used in Start-up India, programme announced by Government of India. The definition is given in Government Gazette on 17/02/2016. The Gazette Notification says, the following entities shall be considered as “Start-up”:

  • Entity up-to 5 years from the date of its incorporation
  • Entities having annual turnover in any of the financial year not more than Rs.25.00 Crores
  • Entity working for innovation, whether innovation is for product, process or service induced by technology or intellectual property i.e. entity should use new innovation and develop any product, process or service for commercialization.

The notification further provides that any organization made by reconstituting an already running business or by splitting any existing business will not come under the preview of Start-up.

For claiming tax benefits for a Start-up, the organization must meet all the above discussed criteria and further it shall have to obtain certification that it is an eligible business for Start-up from Board of Certification (An Inter-Ministerial Board with representatives from DIPP-Ministry of Commerce & Industry, Department of Science & Technology and Department of Biotechnology)

The entity will cover:

  1. A Private Limited Company under The Indian Companies Act, 2013
  2. A Limited Liability Partnership under The Limited Liability Partnership Act, 2002
  3. A Registered Partnership under The Indian Partnership Act, 1932

Two very important queries of aspiring Start-ups have also been explained in the notification:

      a.)What will constitute innovation?

  • Any entity which will work for developing and commercializing a new product/process/service or will bring a sizable improvement in the or a product/process/service being used presently. In other words, it can be well said that anything creating or adding value for users/customers of that product or in its work flow will make an entity eligible to be categorized as a Start-up.

      B.)What will be the process for recognizing a Start-up or certifying that the entity satisfies the requirements of innovation in business/process/service?

  • The entity shall have to apply through Mobile Application or Web Portal of DIPP. Along with the application, a certificate from
  • Any Incubator being set up by PG College of India
  • or a support letter of Central Government or State Government funded Incubator
  • or SEBI recognized Incubator, a Private Equity Fund, some Angel Investor gives a letter of funding for 20% or more equity
  • or letter of funding from Central or State Government through any innovation promoting scheme.
  • or any entity has filed a patent and it has been published in Journal by India Patent office.

Till now the Mobile Application or the Web Portal of DIPP has not been launched, but once it is launched, the approval for application, with relevant documents uploaded, shall be immediate and a reference number shall be issued. It will be immediately recognized as Start-up. No procedural relays, but upon subsequent verification if it is found that any document of the concerned applicant was forged or the application was uploaded without relevant documents then such applicant shall have to pay a fine and the amount of fine shall be 50% of the paid up capital and in any case not less than Rs.25000/-.

Even after explanations, aspiring Start-ups have many queries like list of Incubators by Central Government or various State Governments and presently the number of Incubators and the Accelerators in India is very less.  The scheme will be successful only if the number of Incubators and Accelerators is increased and they should also be time bound to decide and issue certificate for such Start-ups.

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