India: Let Us "Start-Up" India.

Last Updated: 7 April 2017
Article by Shrimant Singh

In last couple of years, the buzz-word across businesses as well as industrial sectors is Startups.  So much so that the Government of India has put in and allocated considerable effort, time and  revenue for infusing and nurturing entrepreneurs and facilitating them to execute their innovative  business ideas.

The Startup wave formally launched  in January 2016 when the Government of India published an  Action Plan for Startups terming "Startup India" as a  flagship  initiative intended to build a  strong eco-system for nurturing innovation and Startups in the country. The Action Plan projects  the Start Up initiative as one of the key drivers for achieving sustainable economic growth and  generate large scale employment opportunities.

While the Startup initiative of the Prime Minister was much applauded and widely appreciated across  sectors, there were few shortcomings in the execution of the plan. However, launching a project on  such an extensive and exhaustive scale for boosting small scale industry and delivering the same to  the Indian public is certainly considered as  a commendable effort by the Government Executives and  Ministers. Today, after about a year of its launch, one can safely consider that most of the  discrepancies and/or hiccups in the processes and action plan have been resolved. For instance, the government portal has seen regular and substantive updates, and proactive  measures were diligently taken to make this ambitious initiative a success.

The present article is an effort to  collate salient features of the Startup India initiative and  also tries to answer questions that we as Facilitators receive from entrepreneurs.

What exactly is a startup in legal terms: The qualifiers for getting the "Startup" certification from the Government are-

  • The entity should be incorporated or registered in India for not more than 5 years as either a Private Limited Company or a Registered Partnership Firm or a Limited Liability Partnership;
  • The annual turnover shall not exceed INR 25 Crores in any preceding financial year;
  • The entity should be involved in innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Provided that such an entity is not formed by splitting up, or reconstruction of a business already in existence. Further, an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 Crores or it has completed 5 years from the date of incorporation or registration.

The key benefits of Registration:

  • Startups are entitled to have self certification and auto compliance under nine Environmental & Labour laws;
  • To facilitate protection of inventions / innovations, the Startups enjoy 80% rebate on fee while filling an application for patent and the applications so filed by Startups are expeditiously examined and disposed off in fast track;
  • Startups can avail a faster public procurement under the criteria of "prior experience / turnover" in all Central Government ministries or departments;
  • Startups are allowed to exit business in a swift manner as they can undergo winding up of company in 90 days as per provisions of Insolvency & Bankruptcy Code, 2016;
  • The Government of India has announced a fund of INR 10,000 Crore for investments in to Startups through Alternate Investment Funds;
  • Further, INR 2,000 Crore Credit guarantee fund for Startups is also announced through National Credit Guarantee Trust Company / SIDBI over 4 years tax exemptions on Income tax for 3 years;
  • Tax Exemptions on capital gains and on investments above Fair Market Value.

In addition to above, the process of conducting inspections of Startups is simpler and effected without delay. Startups shall be allowed to self-certify compliance on environmental laws through the Startup mobile application of the Government. In case of the labour laws, no inspections will be conducted for a period of 3 years. However, Startups may get inspected by the relevant Government Authority on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer. In case of environment laws, Startups which fall under the 'White Category' as defined by the Central Pollution Control Board.

How to apply for registration as startup: The online application form is made available on the Government website

Applicant Details: Below listed information is required to be provided by the applicant:

  1. Name of the Entity;
  2. Nature of the Entity – Private Limited Company / Limited Liability Company / Registered Partnership;
  3. Incorporation/Registered No.;
  4. Date of Incorporation/Registration;
  5. Address of Registered Office;
  6. Details of authorized representative;
  7. Details of Directors/Partners.

Following supporting documents are required to be filed in the Application for the Certificate.

  1. Letter of Recommendation, in a form specified by the Department of Industrial Policy and Promotion (DIPP) from an incubator recognized by Government of India; or
  2. Letter of support by any incubator which is funded, in relation to the project, from Government of India or State Government as a part of specified scheme to promote innovation ; or
  3. Letter of recommendation from industry association recognized by DIPP; or
  4. Recommendation (with regard to innovative nature of business), in a format specified by DIPP, from any Incubator recognized by Government of India; or
  5. Letter of funding of not less than 20 percent in equity by any Incubation Fund/ Angel Fund/ Private Equity Fund/ Accelerator/ Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or
  6. Letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or
  7. Details of applications for patents filed at the Indian Patent Office (IPO) and published in the Journal by the IPO in areas affiliated with the nature of business being promoted.

Supporting document based on the nature of recommendation selected above. Applicant needs to ensure that the document being uploaded is as per the nature of recommendation selected and is in the prescribed format on the said Government website.

The applicant also needs to upload - Incorporation/ Registration Certificate for the Company / LLP / Partnership Incorporation.

A brief note on innovativeness of products /services offered by the entity is also required to be uploaded along with supporting document on the innovativeness of idea.

In case the applicant applies for tax benefits, the application is shared by the Authority with the Inter–Ministerial Board for evaluation. It is pertinent to note that the entity would be able to avail the Tax benefits only on certification from the Inter-Ministerial Board (IMB). Start-ups recognized by DIPP, Govt. of India can now directly avail IPR related benefits without requiring any certification from IMB.

Based on the declarations made in the application form and the support documents uploaded on the said website, the application

are examined and the registration certificate as the entity being a "Startup" is duly issued by the Government.

To conclude, as a Facilitator for Startups, we can vouch that the process for applying for and award of Startup certificate to an entity is uncomplicated and straightforward. Further, all the involved Government Authorities and Offices are cooperative towards the applicants seeking Startup status. Hence, as stated in the title of this article, we encourage the innovators to come forward and "Let us Start Up" with your entrepreneurial journey in India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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