Startup Policy Decoded

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ARE YOU ELIGIBLE FOR THIS SCHEME?

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KEY FEATURES – STARTUP POLICY

• Start-ups would be allowed self-certification of compliances with certain labour laws and environment laws so as to reduce the regulatory burden.

Self Certification

• The government will develop a fund with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over four years, to support upcoming start-up enterprises.

Credit Guarantee Fund for Startups

• One page registration form will be made available on smartphone via an app and provide “on-the-go accessibility” for registering startups with relevant agencies of the Govt.

Simplifying the Startup process by introducing Mobile App and Portal:

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• Startups commencing their business after 01st April, 2016, shall be exempted from taxation for 3 years in the block of 5 years.

Tax Exemption for Startups for 3 years

• To encourage seed capital availability, the Govt has planned to exempt the investment by incubators .

Tax Exemptions on Incubation Funds

• Startups have been further exempted from paying capital gains tax during the year, if such gains are invested in the Fund of Funds recognized by the Govt, namely VCFs and AIFs

Tax Exemption on Capital Gains

KEY FEATURES – STARTUP POLICY

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• In order to facilitate this exit route for businesses, fast track closure norms have been included in The Insolvency and Bankruptcy Bill 2015”.

Faster Exit of Startups

• In order to enable startups to reduce costs in their crucial formative years, startups shall be provided an 80% rebate in filing patents vis-a-vis other companies.

80% rebate on filing patent applications by startups

• Under this scheme, startups shall be allowed to self-certify their compliances (through Mobile App) with 9 Labor Laws and Environmental Laws

Labour Law relaxations to startups

KEY FEATURES – STARTUP POLICY

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With regard to the definition of a Startup, the limit of turnover has been fixed at a limit of INR 25 Crore which is too high giving a scope for exploitation of loopholes.

Certification from an inter-ministerial board will bring in more license raj and red tapism

Startups should be working towards (i) innovation, (ii) development, (iii) deployment or (iv) commercialisation of new products, processes or services driven by technology or intellectual property, this itself is ambiguous

Compliance regime based on self-certification is good but the fundamental issue of compliance still persists. Startups still have to comply with the payment of gratuity, payment of provident fund, contract labour regulations. Once this 3 year window is over, you could still be prosecuted for non-compliance for the first 3 years of operations.

Just give Startups exemption from labour laws in the first 3 years itself.

All is not well with the Startup Policy

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All is not well with the Startup Policy

The government is talking about Insolvency and Bankruptcy Bill, 2015 as a tool for Faster exits for Startups. It should float special schemes where winding up should not be (i) expensive and (ii) time consuming. It makes little sense for a company going through bankruptcy to pay more money in a long-drawn winding-up process.

Tax exemption for 3 years in the period of 5 years is fine, but real help would have been exemption from Service tax laws for the initial years.

Tax exemption on investments above fair market value should be applied to all investments in Startups, whether by VCs, angels, HNIs, incubators or accelerators

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Stay away from Startups

Give exemption in compliances wrt Labour law, Funding route and Exit policies

Give capital gain exemption to investors at par with Singapore laws

Create right Infrastructure Support

Idea should be to encourage startups to relocate to India, and see India as the only place to startup

3 Things Government should aim to do

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ADDITIONAL PLANs - START UPs

Setting up of a Single Point of Contact and hand holding facilitator in the form of Startup Hub

Relaxed Norms of public procurement of startups Organizing of Startup Fests and Grand Innovation Challenge Launching of Atal Innovation Mission for promotion of entrepreneurship and innovation Setting up of 35 new incubators, wherein upto 10 crores of funding support shall be

provided by the CG Setting up of 7 new research parks in the IITs modelled on the research park at IIT Madras. Promotion of entrepreneurship in biotechnology be setting up of 50 new bio incubators, 150

technology transfer offices, 5 new bio clusters. Targeted Innovation focused programs for students for showcasing innovation and providing

a collaboration platform

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With the vision to create a world-class startup ecosystem in the state through strategic investment and policy interventions, Karnataka just released its startup policy 2016, the focal point being:

To create six lakh direct jobs in the State.

To reimburse the marketing costs up to 30 percent under a yearly basis; provided the startup is registered to a recognised incubator.

Stimulate growth of 20,000 technology startups.

Mobilise Rs 2,000 cr. fund of funds.

Facilitate generation of at least 25 innovative technology solutions with social impact.

Startup Up – Karnataka – Key Pointers

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START UP DEFINITION – KARNATAKA POLICY

The startup should not be older than four years.

It should be registered in Karnataka.

50 percent of its workforce should be employed in Karnataka.

Benefits will cease after the company reaches revenue of Rs 50 crore.

Should be technology based.

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