Amit Jain
This is in continuation of the previous article on the start ups, wherein we try to throw more light on the subject. Also, we have received several queries from the article which we try of answer herewith.
In the outset we do clarify that the GOI has not come up with any clarification on various terminology. We try to decode the same:
1. When does the period of 5 years start :
The question is relevant to gain the benefits offered to the startups.
- One may presume that the inception of the idea is the beginning of the period or
- Is it from the date of registration of Company/LLP/Partnership? or
- On receiving of the recommended letter as required or
- On registration with DIPP
We can easily rule out point 1 and 3. Now is it date of registration of firm or approval from DIPP ?
It is evident that the registration of firm is first step to approach the DIPP.
The registration of firm as registered entity will be second step and DIPP may be approached. However this process will take place in the second phase of startup India portal.
The registration with DIPP is final and not recommendatory. Hence, the period of 5 years starts from the DIPP approves the startup activity or the date as may be notified by the DIPP.
2. Does the 5 years include 5 financial year starting from 1st April and ending on 31st March or the date on actual inception of the start up?
The answer to the question is the date of the inception. In no way can it be the financial year.
There may be situation wherein the firm is registered on 1st April and in another case on 31st of March. Such a scenario will give benefit to one and loss to other start up.
3. What if my turnover exceeds the prescribed turnover limit of Rs 25 crores within the financial period?
In such a case, we will fall outside the purview of the definition of start ups. The firm may be availing the taxation benefit in a window of 3 years but the turnover exceeds 25 crores in mid-year. Do we avail the benefit or the proportionate benefit?
Thought the GOI has not issued any guideline on the same, we can conclude the benefit will not be given proportionately, until of course the clarification is issued. Taxation Law takes the entire financial year into consideration for the tax return filling.
4. Innovation, Development Deployment and commercialization of the new product or process or services are very integral to the definition of start ups.
What if an idea was already in place but the innovation or development or deployment or commercialization failed to take place?
We interpret that the failure does not take away the essence of the definition of startup? The idea floats and definitely would fall within the purview of GOI definition. However, again it is totally up to the Government to take any stand till the time clear understanding is developed.
5. When we say new product or process or service, does it need to be a totally new or an improvised product, process or service is included.
This is a catchy question. The intent of the Government is having ‘something’ new in the market.
An improvisation does not fulfill the intention with which the scheme has been launched; so we may conclude that improvisation is not included unless some major changes are made, which gives the product a new flavor. A utility or a benefit is to be added.
A utility in the sense that product is having multiple benefits or the process helps major reduction in cost or reduction in time or may be a service which provides multiple usage may be considered. The question remains the same – what is the acceptance of the government?
6. The product or process or service is technology driven:
Now, what is technology? The oxford dictionary defines the technology as follows:
- The application of the scientific knowledge for the practical purposes, especially in industry(advances in -computer technology);
- machinery and devices developed from scientific knowledge;
- branch of knowledge dealing with the engineering or the applied sciences.
Practically speaking, there is nothing around us which does not involve technology. From a simple desktop/mobile to high tech machinery everything is technology driven.
So if I develop a website to commercially make my product viable, or I use my computer system to plan or design my product on the system, would it be called technology driven?
We can always argue that the answer is yes. However, the questions remain the same – would GOI approve it? We can always draw the conclusion that the end user may not be involved in the technology part of the product or process or service but the provider or the startup must have the usage of technology ,the definition of which is yet to be officially notified.
To add to the same, we see no reason why GOI would reject any product or process or innovation which may not involve technology (a rare possibility that the technology is involved since in the fast changing environment, nothing is untouched by technology: be it driving a car or using phone or computers or swapping a debit/credit card or using a elevator/escalator…everything is technology driven.
7. What is commercial viability?
A commercial viability would mean that the product is saleable in the market. The issue is should it be saleable or it should be sold.
For eg an application is developed wherein farmers can predict the weather to an extent or a females (especially in rural areas gets education of personal hygiene and rights in their native language) but the same can be freely downloaded. Though apparently it is commercial viable but no revenue is generated. What if the product as per original study was viable but failed: Can we term it commercially viable?
Would this not be injustice to entrepreneurs whose innovation was not commercially viable as per initial study but got huge success in the market? They would be denied the benefits which the GOI intend to pass it on to the startups.
Though the exact definitions are yet to be notified and we need to wait till the issues are settled. It will definitely take quite some time till the issues are resolved. We can hope that the GOI will bend to work towards the benefit of the startups and will not be harsh but pave a smooth road ahead for aspiring entrepreneurs.
One can visit the website of startup www.startupindia.gov.in ; it is an initiative by GOI to promote and support the startups. With the honorable Prime Minister personally taking interest, this is an opportunity not be missed.
The views are authors’ personal view. He can be reached at ajainco02@gmail.com and m no 98910-61724.
