Commercial

Government revised definition of start-up to promote entrepreneurship

25.05.2017

With an endeavour to promote entrepreneurship in the country, Department of Industrial Policy and Promotion (DIPP), a nodal body for Start-up India Plan, has amended definition of a start-up. As per changes to start-up definition, a business not older than seven years will now qualify for benefits under Startup India Action Plan (SIAP). Amendments will create more employment opportunities and promote entrepreneurship under Start-up India Plan. Prime Minister Narendra Modi on 16th January, 2016 launched Startup India Action Plan to nurture innovation and enhance economic growth and create large scale employment opportunities.

Significant changes have been made to definition of Start-ups with a view to ease in starting up new businesses. Taking into account long gestation period by Start-ups to establish, from now onwards, an entity shall be considered as a Start-up up to seven years from date of its incorporation/ registration (from earlier 5 years). However, in case of Start-ups in Biotechnology sector, period shall be up to ten years from date of incorporation/ registration. Start-ups are not required any letter of recommendation from an incubator/industry association for recognition or tax benefits. Scope of definition has been widened to include scalability of business model with potential of employment generation or wealth creation. However, an entity shall cease to be a Start-up, if its turnover for previous financial years has exceeded 25 crore or it has completed 7 years and for biotechnology start-ups 10 years from date of incorporation/ registration.

Process of recognition as a 'Start-up' shall be through an online application made over the mobile app/ portal set up by Department of Industrial Policy and Promotion. Entities will be required to submit online application along with Certificate of Incorporation/ Registration and other relevant details as may be required. Further, Startups have to submit a write-up about nature of business highlighting its working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.

In order to obtain tax benefits, a Start-up should be a private limited company or a limited liability partnership which is incorporated on or after 1st day of April, 2016 but before 1st day of April, 2019. Further, It should be working towards innovation, development or improvement of products or processes or services, or should be a scalable business model with a high potential of employment generation or wealth creation. Start-up should obtain a certificate of an eligible business from Inter-Ministerial Board of Certification as constituted by Department of Industrial Policy and Promotion from time to time.

Startup India Action Plan would encourage innovation in India. These changes are incorporated to ensure ease of starting up new businesses; to promote the Start-up ecosystem and build a nation of job creators instead of job seekers.

Tags : Definition start-up Amendment

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