The central government yesterday changed the official definition of what constitutes a ‘start-up’, and thereby extended the benefits that are availed by such enterprises, says a news report. The notification issued says that an enterprise not older than seven years is now considered a start-up. Before the notification, companies up to five years from the date of incorporation could avail the concessions and benefits under the Startup India Action Plan. Startups in the biotechnology can, however, avail the same benefits for the duration of 10 years. Furthermore, for the entity to be considered a start-up, the turnover must be less than 25 crore (this threshold limit remains unchanged).
The move will effectively ensure that start-ups can now enjoy benefits and concessions, like tax benefits etc., for up to seven years. The move is reportedly in response to entrepreneurs, who felt that the duration of five years was ‘restrictive’, says the report. The notification says that an entity can be considered as a start-up if it is working towards “innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.” The notification also clarifies that the organization will cease to be called a start-up on completing seven years from the date of incorporation/registration or if its turnover for any previous year exceeds Rs. 25 crore.
Additionally, the need of Letter of Recommendation from an incubator/industry association has been done away with. To obtain the benefits, a certificate of eligibility must be obtained from an inter-ministerial board of certification, constituted by Department of Industrial Policy and Promotion (DIPP). DIPP has the authority to revoke the recognition certification and tax benefits without prior notice or reason, if the recognition is obtained without uploading relevant documents or based on incorrect information. The notification also says that the process of recognition of a start-up would be conducted via an online application made over a mobile app/portal set by DIPP.
“The above changes are an effort to ensure ease of starting up new businesses to promote the startup ecosystem and build a nation of job creators instead of job seekers,” the statement from DIPP said. Recently, DIPP had made it known that they were working on revising the definition of start-ups. The move is likely to benefit several organizations, and encourage entrepreneurs. The government has reaffirmed its commitment to maintain the momentum in the start-up sector and provide friendly and flexible policies for them to grow.