The #StartupIndia launch has been a much anticipated event this past week. Now that the Honourable Prime Minister, Mr. Narandra Modi has revealed the specifics of the Startup India Action Plan, here are some things you need to know:
1. General flavour of the policy
There was great emphasis on getting the govt out of the way in order to pave the way for success. At the very start of the address PM Modi set the tone for his address by asking the audience to tell the govt. what the govt should NOT do for a change. “We did a lot over the past 70 years”, he added.
2. Self-certification to reduce compliance burden
In order to reduce the regulatory burden, the new compliance regime will be based on self-certification. Startups shall be allowed to self-certify compliance with labour and environment laws. In case of labour laws, no inspections will be conducted for a period of three years. In case of environmental laws, startups under “white category” would be able to certify compliances.
3. Startup India Hub to be the single point of contact for the ecosystem
The action plan acknowledges the importance of “hand-holding” startups through their lifecycle. Towards this goal, a Startup India Hub will be set up which will act as the single point of contact for the entire Startup ecosystem. The Startup India Hub is slated to be "a friend, mentor and guide" for startups through their entire journey.
4. New mobile app to enable easy establishment of startups
A new mobile app will be launched on the 1st of April, 2016 which will enable starting a startup in one day. This app is going to serve as a single platform for information exchange and interaction point with Government and Regulatory Institutions. This is to ensure that startups are registered in one day. Startups will also be able to file for various clearances / approvals / registrations through this mobile app and web portal. PM Modi has also promised brevity in the forms. We're pretty sure many an engineering student is heaving a sigh of relief right about now.
5. Assistance with patent filing
a. To address the patents issues impeding startups, certain reforms were announced in the registration process for patents. PM acknowledged the importance of intellectual property rights protection, at the same time, admitting how lengthy and time consuming the process is. As part of the action plan, startups are to be given assistance via a fast track mechanism for startup patent applications. A panel of facilitators to provide legal support and assistance in filing and disposal of patent applications as well as trademarks and designs under relevant Acts. Government shall bear the entire fees of the facilitators for any number of patents, and trademarks etc that the startups may file. The examination process is going to be hastened. Additionally, Local Chambers of Commerce to be roped in for providing know how and grassroots level assistance to startups.
b. 80 percent rebate on filing of patent applications by startups (vis-a-vis other companies).
6. “Lack of experience” to no longer be an impediment with regards to Public Procurement
To provide an equal platform to startups vis-a-vis the experienced entrepreneurs / companies in public procurement. Startups (in the manufacturing sector) shall be exempted from the criteria of prior experience / turn over without any relaxation in quality standards or technical parameters.
7. Exit assistance for startups
The reality is that startups do fail. In which case the action plan has put forth contingencies and assistance to address those unfortunate situations. To make it easier for startups to exit, provision for fast-tracking closure of businesses have been included in the Insolvency and Bankruptcy Bill of 2015. The PM encouraged the support of the public to get this bill passed in the parliament using social media. Startups with simple debt structures may be wound up within a period of 90 days from filing an application for winding up on a fast-track basis. The PM said he is always willing to support the brave entrepreneurs who dare to fail. A nice gesture, we think.
8. A "fund of funds" with a corpus of Rs. 10,000 crore to be setup
To provide funding support for development and growth of innovation driven enterprises. Government will set up a fund with an initial corpus of Rs. 2500 crore and a total of Rs. 10,000 crore over a period of 4 years. Credit guarantee fund to assist startups and entrepreneurs across all sections of society. The fund size will be Rs. 500 crore per year and will be disbursed through NCGTC / SIDBI.
9. Special tax breaks for startups
Exemption shall be given in case Capital Gains are invested in the “funds of funds”. In addition, existing capital gains tax exemption for investment in newly formed manufacturing MSMEs by individuals shall be extended to all startups. The PM said the FM will enumerate further on the specifics. Furthermore profits accrued by startups to be exempt from tax for a period of three years. To be specific, to promote the growth of Startups, profits of startups set up after 1st April shall be exempted from income-tax for a period of three years. The PM also hinted at the government formulating special schemes for women startups.
In line with the exemption available to venture capital funds to invest in startups above Fair Market Value (FMV) investments made by incubators above FMV shall also be exempted.
10. Incubation and Industry-Academia Partnership - Atal Innovation Mission (AIM)
The launch of a new programme called Atal Innovation Mission (AIM) plans to promote the incubator and tinkering culture in the country. There will be sector specific incubators set up in the country. 500 tinkering labs with 3D printing facilities will be established in universities across India including small towns. Nation-wide awards to be handed out. This is with the aim to give a competitive edge to technology-based startups. Saving the best for last, this for us, is the highlight of the plan. Places to tinker always foster great innovation.