Business Standard

Red tape snipped for start-ups

Vetting by inter-ministeria­l board removed for benefits under Startup India Action Plan

- SUBHAYAN CHAKRABORT­Y

The government has eased the norms under which start-ups can seek benefits according to the Startup India Action Plan. Startups can now be eligible for benefits by simply receiving a certificat­e from the Department of Industrial Policy and Promotion (DIPP), compared with the earlier process of being vetted by an inter-ministeria­l board, said Nirmala Sitharaman, commerce and industry minister.

Addressing the first conference of states organised by the DIPP on Saturday, Sitharaman said the new norms would allow more start-ups to receive benefits, while the government would be able to build a scalable model to spur growth in the new economy. Benefits include faster and cheaper patent examinatio­n and being eligible for the ~10,000-crore ‘fund of funds’. However, it was not clear whether the relaxed norms will be valid for availing tax benefits, which a lot of start-ups covet.

Launched by Prime Minister Narendra Modi earlier this year, the Action Plan offers other incentives like exemption from stringent labour laws for three years, income tax holiday on profit for three years and self-certificat­ion for regulatory compliance­s.

Till date, DIPP has received 782 applicatio­ns from start-ups, seeking tax benefits. Of these, only 180 had the required documents — one of them being the incubator’s certificat­e on innovative business.

While 88 start-ups have been listed by DIPP as possible contenders for most benefits, so far only one start-up has managed to get the approval of the inter-ministeria­l board for tax benefits.

Officials at DIPP blamed the lack of awareness about the process and a dearth of incubators for this situation. Sitharaman announced that hand holding will be provided by DIPP to ensure that entreprene­urs know how to apply for the benefits.

Also, since only 278 government­approved incubators can certify and recommend start-ups, DIPP has certified 20 private organisati­ons, including Nasscom and iSprit, as incubators under the Startup India Action Plan. The move will help in growing the reach of incubators for upcoming startups. Also, a cap of ~ 5,000 has been put on the maximum fee charged by incubators for providing letter of recommenda­tion to start-ups.

Apart from mapping potential incubation centres across the country with a special focus on Tier-II and Tier-III cities, DIPP has asked states to suggest names of educationa­l institutio­ns for this purpose.

As part of the first states’ conference on the Startup India initiative, the Centre invited Gujarat, Telangana, Karnataka, Rajasthan and Kerala to present their work on startup ecosystem.

As a global hub of informatio­n technology and allied services, Hyderabad was showcased by Telangana as a startup hub. Claiming to be India’s biggest incubator, the T-Hub in Hyderabad is aiming to build three million square feet of working space for start-ups. This is part of the state government’s aim of providing a massive 10 million square feet space within the next five years, apart from seed funding support of nearly ~250 crore and a larger innovation fund. Hyderabad is also set to host a start-up conference, organised by DIPP in September.

Gujarat, on the other hand, focused on iCreate, which hosts the country’s oldest incubator. Gujarat has announced sustenance allowance of ~10,000 per month to young startups. Gujarat will be announcing a detailed start-up mission by November. Officials at DIPP said other states may be invited to similar conference­s later this year.

India currently has the thirdlarge­st number of start-ups in the world. While there were more than four thousand technology-based start-ups, Sitharaman said the number was expected to reach 12,000 by 2020. The government has been hardsellin­g its start-up initiative­s and Sitharaman revealed that she will be holding separate discussion­s with stakeholde­rs in the start-up economy like venture capitalist­s, major founders, incubators, educationa­l institutio­ns and private equity funds over the next one month.

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