Government Amends Definition of Start-Ups

The Department of Industrial Policy and Promotion (DIPP), which is the nodal body for Start-up India, has amended the definition of a start-up. As per the new definition, an entity will be considered as a Start-Up if its turn over is less than Rs 25 crore and has not completed seven years from the date of its incorporation/registration. In the definition, the change is with respect to the time period which is currently five years. The new definition has increased it to 7 years taking into the consideration the long gestation period involved in establishing start-ups.

Other Salient Amendments

The scope of definition of start-up will also be widened to include scalability of business model with potential of employment generation or wealth creation. 
An entity that has completed 7 years from the date of its incorporation or if its turnover exceeds Rs 25 crore, it will cease to be a start-up.
The process of recognition of an entity as a start-up will be through an online application made over the mobile app/portal set up by the DIPP.
For the Start-Ups in the biotechnology sector, they will be considered as start-ups for a period of up to 10 years from the date of incorporation/registration.
Start-ups will not require a letter of recommendation from an incubator or an industry association to get tax benefits under the Start-up India action plan. However, the entities should obtain a certificate of an eligible business from an inter- ministerial board of certification as constituted by the DIPP to claim tax benefits.
An entity will be deemed as a start-up if it is working towards innovation, development or improvement of products/processes/services, or if it is a scalable business model with potential for employment generation or wealth creation.

Significance

The new definition and amendments will help to ease of starting new business and will promote the start-up ecosystem. The tweak in the definition will also help the entities to avail government sponsored venture funding and tax and other benefits. It will create more jobs and promote entrepreneurship under the Start-up India scheme.

Start-up India was launched by Prime Minister Narendra Modi on 16 January 2016 to promote innovation and enhance economic growth and employment opportunities.


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