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Indian Government Finally Sets A Definition For “Startups”

The Ministry of Commerce and Industry released a notification on April 17, 2015, regarding the whole idea of start-ups. The speech given by Prime Minister Narendra Modi during the unveiling of the ‘Startup India, Standup India’ policy unveiled several points regarding the very notion of startups. The government also laid out several norms for identifying one entity as a start-up. The government also expect start-ups to work towards innovation, development, deployment, and commercialization of new products, processes, or services driven by technology or intellectual property.

The Inner Scoop

A new start-up will obtain tax benefit only if it receives a certificate from the Inter-Ministerial Board of Certification. Registration of a start-up is done either through a mobile app or the portal of DIPP (Department of Industrial Policy and Promotion) with necessary documents. Alternative arrangements are established until the app or portal gets launched by DIPP. A recognition number will be issued on with the uploading of the application. A fine will be induced on the applications that are uploaded with insufficient or forged documents.

The Norm Bits

The notification also provides clear norms on the basis in which a startup is identified as one. It says that a separated firm from a previously registered company will not be considered a startup just like a company would not be considered a startup if it doesn’t aim to develop and commercialize. Tax benefit will also not be provided for those entities which establish another e-commerce firm along with an existing one of their own. Even though the word innovation and development frequently appear in the notification, the description of startups creates ambiguity as it is only approximately defined. Also, the involvement of the government and the incubator recognition by the government could create unwanted scope for corruption.

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