Ashish Baid

ashish-baid

History

Startup of business in India was subject to the clearance from many regulatory bodies, in terms of the Compliance pertaining to the set-up of businesses in India. Whenever an existing business or new start-up plan for setting up their manufacturing units in India, it can establish their manufacturing unit subject to the clearance from the Central Pollution Control Board and pertaining to certain compliances as prescribed under the Factories Act and other Labour Laws. India is country where legislation is the biggest challenge for any startups. Startups need huge amount of funds to set up their business in India, with subject to the compliances of all the applicable provisions.

Startup India

As rightly said by Prime Minister Mr. Modi, I see startups, technology and innovation as exciting and effective instruments for India’s transformation.

Indian entrepreneur is moving from the typical business sense to the digital business, eg. E-commerce sector, IRCTC portal, Payment wallet companies where the entire shopping can be done on mobile app, tickets for long distance can be booked through online website of Railways. This is few steps, which has helped the Indian economics to grow, resulting in increase in GDP in last few years.

Startup India is an initiative of the Government of India, which is intended to build a strong eco-system for nurturing innovation and Startups in India that will drive sustainable economic growth and generate employment opportunities for young talent in India.

Definition of Startup (only for purpose of Government Scheme)

Startup means an entity, incorporated or registered in India not prior 5 years, with annual turnover less than INR 25 crore in any preceding Financial Year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Unit is not incorporated for split up, reconstruction of business.

Benefit Of Startups

Startup lndia Hub

  • Collaborate with Central and State Government, Indian and foreign VCs, angel broking, banks.
  • Assist in financing, feasibility, business structuring, etc
  • Organize training programs in collaboration with government organization, incubation center, educational institution and private sectors. Inspection will be conducted after 3 years
  • Hub came into operational since April 1, 2016. The Hub has been able handle about 25000 queries from Startups through telephone, email, etc.
  • One can write to Hub on email id: dipp-startups@nic.in or call on Toll Free number: 1800115565

Mobile App & Portal

  • Registration of Startups with Government regulatory authorities dealing in Labour Law and Environmental Law
  • Simple form to be made available for Labour licensing and Environmental clearance
  • Mobile apps should be linked with MCA portal and firms details for ease of sharing the details
  • Tracking of the registration application, submission of any pending documents, if any and the digital version of the Certificate to be available on mobile app for downloading.

Above are few salient features of Startup India Scheme

Contribution of RBI

  • Indian Startup having overseas subsidiary, may open a Foreign Currency Account. This account can be used for the purpose of crediting the earnings out of export/sales made by either startup or by its overseas subsidiary.
  • Startups can receive Foreign Venture Capital Investment, also facilitate the transfer of shares from Foreign Venture Capital Investments to Resident or Non-Resident
  • Simplifying the process for dealing with delayed reporting of Foreign Direct Investment (“FDI”) related transaction by imposing penalty into regulation itself.
  • New guidelines are issued for External Commercial Borrowings by Startups with maturity period of 3 years.
  • Foreign VC can invest in 10 sectors without RBI approval
  • RBI has created a dedicated email helpline ‘helpstartup@rbi.org.in’. Startups will go overseas for cross border transaction, investments and borrowings, so the companies can take the guidance `from RBI helpline for understanding the ambit of the regulatory frameworks.

Tax Exemption

For carry forward of the losses, the condition of shareholding of 51% of voting rights has been abolished subject to the condition that the promoter holding will remain unchanged. Profit exemption has been enhanced to 3 out of 7 years from 3 out of 5 years.

Self-Certification (Exemption from Compliances)

Compliance with Labour Law and Environmental Law are time consuming and due to lack of awareness, business can indulge in heavy losses due to non-compliance or delayed compliance with various provisions of these Laws. Often small and new players are not much aware about the compliance to be done under Labour and Environmental Law. Number of regulatory visits and inspection are done by the department, making the function of the organization difficult and worthless, when organization are required to comply with various laws at the stage of its growth. In order to make Compliance friendly and flexible, simplification is required in the regulatory regime.

Inspection by the department should be meaningful and efficient. In case to avoid frequent and number of inspection, scheme of self-certification by the organization should be introduce. In case of Labour Laws, no inspection will be conducted within 3 years from incorporation. Startups may be inspected on receipt of any complaints in writing which are approved by at least one level senior to the inspecting officer.

In case of Environmental Law, Startups which fall under the ‘white category’ (as defined by Central Pollution Control Board) would be eligible for self-certification, whereby the compliances pertaining to three Environment Law: The Water (Prevention and Control of Pollution) Act, 1974, The Water (Prevention and Control of Pollution) Cess (Amendment) Act, 2003 and The Air (Prevention and Control of Pollution) Act, 1981.

Following are the list for which self-certification are required:

Labour Laws:

  • The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996.
  • The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
  • The Payment of Gratuity Act, 1972
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  • The Employees’ State Insurance Act, 1948

The Insolvency and Bankruptcy Code 2016

The Startups can go for revival their business within period of 90 days from the application made. In case if the Startups are not successful, then the entrepreneur can revive their business with quick time instead going for the normal route of the winding up. Entrepreneur enters into new business with the risk of return for all the stakeholders involved in setting up the new business. Market is ascertaining and that carrying huge amount of risk needs funds. In case of unsuccessful efforts, thru IBC code, one can take the exit in 90 days instead of going through the lengthy procedure of the winding up, which is again subject to the cost effective and time consuming.

Success Rate (As on 15th March, 2017)

  • Out of 1835, 713 got recognition of Startups
  • Out of 146 application, 10 were approved for tax benefits
  • List of 36 industries are listed under white category by CPCB
  • 267 startups have been mentored for incubation and funding support
  • Panel of 409 facilitators for Patent and 475 facilitators for Trademark application has been constituted
  • MCA will be able to wind up startups in 90 days instead of 180 days in IBC
  • MCA is in process of notifying Startups as “fast track firms”
  • INR 500 crore has been released to SIDBI in FY 16
(Author can be reached at 8097979445 or on ashishbaid.2009@gmail.com)

Disclaimer: This article is drafted with the intention of imparting the knowledge on the “Startup India”.  User are requested to take proper due diligence before using the article and that I am nowhere liable for any losses or damages. I have drafted this article with due skills and knowledge, but the user are requested to refer the same with proper due diligence.

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