India
Startup Story 2016
It is seen that the last
two years have seen a swing of initiatives and agendas announced by the
government – starting with National Digital Literacy Mission with its
worthwhile agenda of enabling one person in each Indian family to have digital
skills, we have seen Swach Bharat Abhiyan, Make in India, Start up India and
the more recent demonetization drive and the ‘Cashless India’ opportunity
capturing the imagination of the country. But if one were to look forward to
2017 and beyond, it is probably a new agenda and horizon for start-ups and the
fostering of a true entrepreneurial eco-system in the country that will get
India to the sustained 10% growth that is imperative to meet the collective
aspirations of a billion Indians.
Resilience. Survival.
Strategy. Profitability. The startup vocabulary of 2016 has been markedly
different from the glory years of 2014 and 2015 when unicorns were born every
other week, and sky-high valuations meant scale and size won over strategy and
solid business models. The start up movement in the country was given a
tremendous boost a year ago with Start up India call.
This year as funds dried
up, a number of promising startups of 2015 shuttered while others laid off
employees. Food tech, hyperlocal services and e-commerce, which were the heroes
of 2015, found the going tough.
As India becomes a hub for ideation, brainstorming and
experimentation, the country has huge potential to emerge from the prototyping
phase to the manufacturing of technology-driven hardware all together. Already
equipped with the talent pool, with the right access measures to
infrastructure, tools and technologies, hardware and systems solutions can
address the real business and consumer needs that are unique to India, making
the country less dependent on product imports and giving an impetus to a
culture of technology adoption.
Ultimately, local innovation will fuel the curve of digital growth
or digitisation in India, because the problems of India are unique and their
solutions will be found locally. A billion connected and smart devices, for a
billion people, through smart ideas. Imagine that.
Measures taken by
Government for Startups – 2016
I. Measures taken by
Department of Industrial Policy and Promotion.
1. Fund of Funds - For providing fund support
for Startups, Government has created a ‘Fund of Funds for Startups (FFS)’ at
Small Industries Development Bank of India (SIDBI) with a corpus of Rs. 10,000
crore.
The FFS shall contribute to the corpus of
Alternate Investment funds (AIFs) for investing in equity and equity linked
instruments of various Startups. The FFS is managed by Small Industries Development
Bank of India (SIDBI) for which operational guidelines have been issued. In
2015-16, Rs. 500 crores was released towards the FFS corpus.
2. Credit Guarantee Fund for Startups
· Since debt funding for Startups is perceived
as high risk activity, a Credit Guarantee Fund for Startups is being setup with
a budgetary corpus of Rs 500 crore per year, over the next four years, to
provide credit guarantee cover to banks and lending institutions providing
loans to Startups.
· Once rolled out, the scheme, in the lines of
credit guarantee scheme for MSME, is likely to provide a huge impetus for
enabling flow of much needed credit to the Startups which may run into several
thousands of crores.
3. Relaxed Norms in Public Procurement for
Startups
Provision has been introduced in the procurement
policy of Ministry of Micro, Small and Medium Enterprises (Policy Circular No.
1(2) (1)/2016-MA dated March 10, 2016) to relax norms pertaining to prior
experience / turnover for Micro and Small Enterprises. Department of
Expenditure has issued a notification for relaxing public procurement norms in
respect of medium enterprises by all central Ministries/Departments.
4.Tax Incentives:
· 3 Year
Tax Exemption
The Finance Act, 2016 (Section 80- IAC) has
provision for Startups (Companies and LLPs) to get income tax exemption for 3
years in a block of 5 years, if they are incorporated between 1st April 2016
and 31st March 2019. To avail these benefits, a Startup must get a Certificate
of Eligibility from the Inter-Ministerial Board.
· Removal of Angel Tax:
Tax exemption on investments made in excess of
face value in the shares of a Startup company has been introduced on 14 June
2016.
· Tax Exemption on Capital Gains:
Section 54 EE has been introduced under the
Finance Act, 2016 which provides for exemption of capital gain arising out of
transfer of long term capital asset invested in a fund notified by Central
Government.
Section 54GB of Income Tax Act, 1961 has been
amended to provide for exemption from tax on capital gains arising out of sale
of residential house or a residential plot of land if the amount of net
consideration is invested in equity shares of eligible Startups.
5. Legal Support and Fast-tracking Patent
Examination at Lower Costs
A scheme for Startups IPR Protection (SIPP) for
facilitating fast track filing of Patents, Trademarks and Designs by Startups
has been introduced. The scheme provides for expedited examination of patents
filed by Startups. This will reduce the time taken in getting patents. The fee for
filing of patents for Startups has also been reduced up to 80%. Panels of facilitators for Patents and
Trademark applications have been formed to facilitate the process of patent
filing and acquisition. The facilitators would provide legal guidance and
handholding through the entire patent acquisition process free of cost.
6. Self-Certification based Compliance Regime:
Compliance norms relating to Environmental and
Labour laws have been eased in order to reduce the regulatory burden on
Startups thereby allowing them to focus on their core business and keep
compliance costs low. Ministry of Environment and Forests (MoEF) has published
a list of 36 white category industries. Startups falling under the “White
category” would be able to self-certify compliance in respect of 3 Environment
Acts -
· The Water (Prevention & Control of
Pollution) Act, 1974;
· The Water (Prevention & Control of
Pollution) Cess (Amendment) Act,2003
· The Air (Prevention & Control of
Pollution) Act, 1981
Further, Ministry of Labour and Employment
(MoLE) has issued guidelines to State Governments whereby Startups shall be
allowed to self-certify compliance in respect of 6 Labour laws. These shall be
effective after concurrence of States/UTs. The Acts are:
The Building and Other Constructions Workers’
(Regulation of Employment & Conditions of Service) Act, 1996.
· The Inter- State Migrant Workmen (Regulation
of Employment & Conditions of Service) Act, 1979
· The Payment of Gratuity Act, 1972
· The Contract Labour (Regulation and Abolition)
Act, 1970
· The Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952
· The Employees’ State Insurance Act, 1948
So far 9 States have confirmed compliance to the
advisory issued by Ministry of Labour and Employment (MoLE):
· Rajasthan
· Uttarakhand
· Madhya Pradesh
· Chhattisgarh
· Delhi
· Jharkhand
· Gujarat
· Chandigarh
· Daman & Diu
7. Setting up Incubators
· Under Atal Innovation Mission, Niti Ayog will
set up Atal Incubation Centers (AICs) in public and private sector. NITI Aayog
has received 3658 applications (1719 from academic institutions and 1939 from
non-academic institution) for setting up Atal Incubation Centers (AICs) from
both Public and Private sector organizations.
· Under the Mission, a grant-in-aid of Rs. 10
crore would be provided to scale up an existing incubator for a maximum of 5
years to cover the capital and operational costs in running the center. NITI
Aayog has received 232 applications for providing scale up support for
established incubation centers.
8. Setting up of Startup Centers and Technology
Business Incubators (TBIs)
14 Startup Centres and 15 Technology Business
Incubators are to be setup collaboratively by Ministry of Human Resource
Development (MHRD) and the Department of Science and Technology (DST). Out of the 14 Startup Centers, 10 have been
approved. Once MHRD releases its share of Rs. 25 lakhs each for the Startup
centers, the Startup centers would be supported by DST by December, 2016.
The target of sanctioning 15 TBIs is expected to
be achieved by December 2016.
9. Research Parks
7 Research Parks will be set up as per the
Startup India Action Plan. Out of these 7, IIT Kharagpur already has a
functional Research Park. Further, DST will establish 1 Research Park at IIT
Gandhinagar and the remaining 5 shall be set up by Ministry of Human Resource
Development (MHRD) at IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT Delhi and
IISc Bangalore.
II. Measures taken by
Ministry of Corporate Affairs
Relaxations for companies, including start-ups
have been provided through changes in various rules notified under Companies
Act, 2013, and include the following: -
a)
the upper limit on the acceptance of deposits has been enhanced to
35% of net worth instead of earlier 25%;
b)
allowing start-ups to issue Employee Stock Options to promoters
working as employees;
c)
increasing the limits with regard to sweat equity that can be
issued by a company from 25% of paid up capital to 50% of paid up capital;
Seamless availability of names and quicker
incorporation: - The name availability guidelines have been amended to allow
the companies to select innovative names. The process of making the names
available has been entrusted to a dedicated “Central Registration Centre”
(CRC), whereby names are being approved within next business day. CRC is also
handling incorporation/ registration of companies. Incorporation is being done
in a day when the applicant opts for filing integrated incorporation form known
as SPICe.
Exemptions under section 462 granted to four
classes of companies – private companies, Government companies, Nidhis and
charitable companies, exempting such companies from various compliances and
other requirements of the Companies Act, 2013. The exemptions provided to
private companies have reduced the compliance burden on start-ups.
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