What
is a startup?
- A startup is an entity, private, partnership
or limited liability partnership (LLP) firm that is headquartered in
India, which was opened less than five years ago and have an annual
turnover less than Rs25 crore.
- To be eligible for considering as startup,
the entity should not be formed by splitting up or reconstruction and its
turnover should not have crossed Rs25 crore during its existence.
What
are the advantages?
- Under the Scheme, no inspection would be
carried out on start-ups for three years regarding labour laws.
- In addition, environment law compliance is
required only post-self certification.
Are
there financial benefits?
- In patent costs, the startups can claim an
80% rebate.
- That means, if a startup applies for a
patent, the government will fund the defence of the patent, and give
rebate of 80% in the fees.
- The government will also pay fees of the
facilitator for helping the startup obtain the patent.
- Faster patent registration and protection
for Intellectual Property Rights (IPRs) is provided under the Scheme.
- Patent filing procedures to be simplified.
Significant reduction in fees for filing Patents.
What
are the advantages for startups regarding registration?
- The government is launching a mobile app on
1 April 2016 and a portal that will allow companies to register in a
day.
- In addition, there would be a single point
of contact for Start-up India hub.
- In addition, there will be single window
clearance for clearances, approvals, and registrations.
What
is the government’s role in boosting start ups?
The Ministry of Human Resource
Development (HRD) and the Department of Science and Technology have agreed to
partner in an initiative to set up over 75 startup support hubs in the
1.
National Institutes
of Technology (NITs)
2.
Indian Institutes
of Information Technology (IIITs)
3.
Indian Institutes
of Science Education and Research (IISERs)
4.
National Institutes
of Pharmaceutical Education and Research (NIPERs)
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What
are the special benefits for startups in public procurement?
Startups in the manufacturing sector
are exempted from the criteria of prior ‘experience/ turnover’ without any
relaxation in quality standards or technical parameters in public procurement
(by government).
How
much funding is available for this scheme?
- Rs10,000-crore fund for new enterprises,
equal opportunity in government procurement, a Rs500-crore credit
guarantee scheme and easier exit norms.
- Japanese Softbank, which had already invested $2 billion in Indian startups, has pledged total investments of $10 billion.
What
are benefits under the provision on Income Tax?
- Under the Scheme, Income Tax exemption is
available for first three years.
- However, the startup will be eligible for tax
benefits only after obtaining certificate from the Inter-Ministerial
Board, setup for this purpose.
Is
there any exemption in capital gains tax?
- Yes. If the money is invested in fund of
funds recognised by the government, the investor can claim capital gains
tax exemptions.
- In addition, existing capital gain tax
exemption for investment in newly formed MSMEs by individuals shall be
extended to all startups.
What
is a accelerator and incubator ?
- Accelerators
accelerate the speed of your business. In most cases an existing business
or an idea. The programs are short and intense. They help you hone your
idea and build it out.
- Whereas
incubators incubate your early pre-product idea, help you make a
prototype, and further make a product out of it. The engagement is longer
than an accelerator.
Startup India Action Plan aims to set up 35 new
incubators based on the PPP model.
Analysis !! As UPSC guys we
need to know both the positive as well as negative side of the story !!
First, lets see the POSITIVE ASPECTS
!
- The thinking that has gone
into the action plan is impressive. The plan attempts to address exactly
the right set of issues. Lots of successful Indian companies
have been relocating to Singapore in the past few years because of the
difficulty of doing business at home. If Startup India’s execution matches
the vision, it will reverse this trend and be a huge catalyst for our
entrepreneurial ecosystem.
- Startup India is not novel in
the global context. In fact, contrary to what many commentators feel, India is
not competing with Silicon
Valley in terms of innovation and global investor attention. Catching
up with Silicon Valley is a distant goal. At best, India is playing catch
up with other international startup ecosystems. The impressive Startup Chile, which
provides equity-free investments to startups and visas to foreign
entrepreneurs, attracts entrepreneurs from around the world. Startup
Brasil is another similar programme. South Korea’s initiatives in the form of startup
funds, visa programmes, tax incentives, broadband infrastructure, and
government-sponsored incubators are simply unparalleled. Israel too has
had similar programmes for several decades now. All of these countries are
vying for the attention of global investors. India does too. And Startup
India can finally make India truly competitive in the global tech and
innovation scene.
Where does INDIA's
COMPARATIVE ADVANTAGE lies as far as STARTUP INDIA is concerned ?
- First off all, the domestic market is huge, and we will have another wave of tech-enabled services companies emerge to cater to domestic demand.
- Second, we
have a young labour force with lots of engineers. This will help feed into
Software-as-a-Service (SaaS) companies that will leverage local talent to
service global tech markets. A number of other sectors that don’t usually
get the attention of VCs – such as manufacturing and agriculture – are
also set to get a wave of support.
Now lets talk NEGATIVE !!!
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· “Eventual freedom from State will
be true evolution for startup” was made
at Vigyan Bhavan by none other than Mr. Arun Jaietly, the Finance Minister of
India. The statement, later endorsed by Prime Minister Modi.........Startups
as defined by an inter-ministerial group, approval from a government approved
incubator, tax exemptions, State-sponsored Fund of funds – all these measures
will not reduce but increase interaction and intervention by State
multi-fold, and will create multiple layers of fault-lines and defeat the
very purpose of startup policy as well as act against the vision of the
scheme.
· While tax
exemptions and sops are welcome, they will not help startups in
short-term/long-term as startups/funds are looking for a stable legal
environment, clarity in tax laws and minimal interaction with government in
the initial formative years. Unfortunately, things are totally reverse at
present moment and nothing has been done to address these issues.
· Startups /
investors are loaded with paper work at every step and every paper work
results in extra costs as well as breeding of corruptions. One such example
is “valuation certificate” which is required by the startup to
establish fair value of startups at the time of raising capital. After every
transaction by an investor, valuation certificate from an accountant is
needed and tax is levied on deemed income if there is gap between accounting
firm valuation and investors. This rule creates huge issues in creating ESOPs
/ investments / Call / put options, etc.
· Self-certification
of compliance, via the mobile app, with nine Labour and three Environment laws
is a welcome move with a three-year moratorium on labour inspection. But why
not include simple self-certification compliance for all other laws too, eg
secretarial and governance matters? And why not for say, five years?
Especially, when the definition of a startup talks of an entity that is less
than five years old?
· Since April 2015, central and
state governments and PSUs have to mandatorily procure 20 per cent from
micro, small and medium enterprises (MSMEs). This has been extended now to
include startups. But only
startups in the manufacturing sector are eligible! Why not all startups?
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