Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of Startup businesses, to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower Startups to grow through innovation and design.
Several programs have been undertaken since the launch of the initiative on 16th January, 2016 by Hon’ble Prime Minister, to contribute to his vision of transforming India into a country of job creators instead of job seekers. These programs have catalyzed the Startup culture, with Startups getting recognized through the Startup India initiative and many entrepreneurs availing the benefits of starting their own business in India.
The 19-Point Startup India Action Plan envisages several incubation centres, easier patent filing, tax exemptions, ease of setting-up of business, a INR 10,000 Crore corpus fund, and a faster exit mechanism, among others.
The Action Plan is divided across the following areas:
♦ Simplification and Handholding
Action Plan: 1 – Compliance Regime based on Self-Certification
Action Plan: 2 – Startup India Hub
Action Plan: 3 – Rolling-out of Mobile App and Portal
Action Plan: 4 – Legal Support and Fast-tracking Patent Examination at Lower Costs
Action Plan: 5 – Relaxed Norms of Public Procurement for Startups
Action Plan: 6 – Faster Exit for Startups
♦ Funding Support and Incentives
Action Plan: 7 – Providing Funding Support through a Corpus of INR 10,000 crore
Action Plan: 8 – Credit Guarantee Fund for Startups
Action Plan: 9 – Tax Exemption on Capital Gains
Action Plan: 10 – Tax Exemption to Startups for 3 years
Action Plan: 11 – Tax Exemption on Investments above Fair Market Value
♦ Industry-Academia Partnership and Incubation
Action Plan: 12 – Organizing Startup Fests for Showcasing Innovation and Providing a Collaboration Platform
Action Plan: 13 – Launch of Atal Innovation Mission (AIM) with Self-Employment & Talent Utilization (SETU) Program
Action Plan: 14 – Harnessing Private Sector Expertise for Incubator Setup
Action Plan: 15 – Building Innovation Centres at National Institutes
Action Plan: 16 – Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras
Action Plan: 17 – Promoting Startups in the Biotechnology Sector
Action Plan: 18 – Launching of Innovation Focused Programs for Students
Action Plan: 19 – Annual Incubator Grand Challenge
Eligibility for Startup India:
As per the Startup India Action plan, the followings conditions must be fulfilled in order to be eligible as Startup:
These start-ups must apply to the Department of Industrial Policy and Promotion (DIPP) to be recognised, which at its discretion may accept or reject the application. Out of the total applications received so far, 14,036 have been recognised as Startups by DIPP and 91 Startups have been approved for availing tax benefits by IMB, as of 3rd week of November, 2018. All the benefits and exemptions are available to the Startups only if they come under the criteria of an ‘Eligible Startup’ as mentioned above.
The role of professional Chartered Accountants in the start-up scheme launched by our Prime Minister is essential, vast and comprehensive. The CAs plays very vital role in execution of Business Model and Revenue Model of any Startups. As the partners in nation building, it is undoubtedly not only an opportunity in professional domain but it is also a responsibility for interest in large. As we see that the growing complexity has made the business atmosphere comparatively difficult in terms of identification of potential grey areas in which most of the start-ups might find themselves in. Due to Statutory and Legal Complexity in India, every business requires a good professional advisor in order to fulfil all statute and Legal requirements applicable to start-ups in their respective fields.
So now it is essential to measure and understand how can chartered accountants justify and help entrepreneurs in making sure that the venture results into a profitable and successful adventure. The government is really working hard to build atmosphere for encouraging start-ups and with a view to facilitate Startups various tax exemptions and benefits are provided which is briefly discussed as under.
The above exemptions and benefits would encourage seed-capital investment in Startups, facilitate their growth and meet the working capital requirements during the initial years of operation. By virtue of these kind of benefits, Start-ups can easily focus on their Business Model and Revenue Model without worrying about the tax outflows and need of Working Capital. Further, they would also promote investments into Start-ups by mobilizing the capital gains arising from sale of capital assets.
The boom in the Startup ecosystem has caught the attention of chartered accountants (CAs), some of whom are seeking an equity stake for the non-audit services they offer. As per regulation, auditors are not allowed to pick up stakes in the company they audit as the question of Independence comes into the picture. Hence, many CAs are into Regulatory and compliance services, Startup advisory services and providing a complete non-business support to a Startup from structure, business plan, corporate law, ESOPs documentation, agreements, fund raising to angel round.
It is a win-win situation for both the Startup and the CAs. While the Startup gets all the services, including ideation on technical grounds, incubation and mentoring, the investing CA can see the upside of an investment if the Startup makes it big. With a CA, a Startup gets holistic advice on all corporate law, accounting, tax and all legal matters. A CA is a generalist and can manage all non-business services for a Startup, which can then focus on the business and operations. The Chartered Accountants can provide Advisory and Professional services in the field of Direct & Indirect Tax like PAN, TAN & GST Registration, Entity Formation and Capital Structuring and accordingly compliance with the respective regulatory authorities and Laws in relation to Shop & Establishment Registration, Provident fund (PF), Employees’ State Insurance (ESIC), Profession Tax (PT), ROC Compliances, RBI & FEMA Compliances and any other applicable Laws.
In addition to above, the Institute of Chartered Accountants of India [ICAI] through Committee for Members in Industry & Business (CMI&B) in its endeavor to promote Startups by CAs has launched its first 15 seater incubation centre at ICAI Bhawan, BKC, Mumbai where whole ecosystem for start-up has been developed.
Hence, In this dynamic and challenging business environment, Chartered Accountants are looked upon as Complete Business Solution Providers. They are thoroughly trained practically in all avenues of Finance, Accounting, Audit and Advisory services for all types of entities including Startups.
CA Pratik Bhavsar
[Email ID: email@example.com]