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DIPP to revise eligibility criteria of start-ups for government support

07 March 2017

The government has proposed to expand the scope of the definition of start-ups in order to make it more inclusive and make more companies eligible for tax and other benefits, giving a further impetus to the start-up eco system, before the month-end.

This is because of a realisation that the present criteria of a five-year period of existence and Rs25 crore turnover are not in conformity with the realities of the start-up eco system.

This has been corroborated by the 'Bharat Navodaya: Start Up India Reform Report', released on Monday, which highlighted that the current definition of a start-up is ''restrictive'' and includes ''subjective criteria to determine eligibility''.

The Department of Industrial Policy and Promotion (DIPP) will revisit the tax benefit eligibility of 200-odd start-ups, and work towards enabling incorporation of companies within six days, said Ramesh Abhishek, secretary, DIPP.

''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 in New Delhi on Monday, he said the government is committed to strengthening the start-up ecosystem and was not hung-up on the definition aspect.

DIPP, he said, was open to the idea of not stipulating any period of existence for a firm being considered a start-up.

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 Rs25 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.

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 cited the example of biotech and medical equipment businesses, 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 1 April 2016, should be considered for tax breaks.

He said while only 10 start-ups had been recommended for income-tax benefits so far, an independent group outside the government has been asked to review all those cases (190 of the 200 that applied for tax benefits) and suggest necessary action.

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