To give further impetus to the start-up ecosystem, the government will before the end of this month re-look the definition of start-ups, revisit the tax benefit eligibility of 200-odd start-ups, and work towards enabling incorporation of companies within six days.
“Just as we are re-looking the definition of MSME, we would like to re-look at the definition of start-ups to be more inclusive of the ground realities,” said Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion (DIPP).
Speaking at IVCA’s Annual India Alternatives Conclave 2017 here on Monday, he said the government is committed to strengthening the start-up ecosystem and was not hung-up on the definition aspect.
The current definition stipulates that a start-up means an entity incorporated or registered in India not prior to five years and not having a turnover in excess of ₹25 crore in any preceding financial year.
“Maybe we don’t need to have a single period of five years for start-ups.
Maybe we can have different periods for different kinds of start-ups. We can also have different criteria for turnover for different sectors,” he said.
Citing the example of the biotech and medical devices sector, Abhishek said that DIPP has been told that a start-up “should have at least eight years, if not ten years, and not five years. Because nothing happens before eight years.”
He said that this matter is now with the Department of Biotechnology and indicated that the government may be inclined to accept this period for the sector.
Abhishek said the DIPP was looking to ease the restriction that only those start-ups that had been incorporated after April 1, 2016, should be considered for tax breaks.
Noting that only 10 start-ups had been recommended for income-tax benefits, Abhishek said he has now asked an independent group outside the government to review all those cases (190 of the 200 that applied for tax benefits) and “tell me if any of them deserved to be recommended”.
The current norms stipulate that a start-up would be eligible for tax benefits only after it has obtained certification from the inter-ministerial board (IMB), set up for such purpose.
Meanwhile, the ‘Bharat Navodaya: Start Up India Reform Report’, released on Monday, highlighted that the current definition of a start-up is “restrictive” and includes “subjective criteria to determine eligibility”.
The solutions for enhancing the definition, according to the report, include eliminating the approval process from the IMB, inclusion of a profitability threshold so that a much wider range of start-ups can be covered, and introducing a clear eligibility criteria.