Startup India Action Plan
It was on the occasion of India’s 69th Independence Day in 2015 that Prime Minister Narendra Modi announced the Startup India initiative from the ramparts of India’s iconic Red Fort. Just five months later, on 16th January’2016 the PM unveiled the historic Startup Action Plan. PM Modi’s talk was laced with humour: “If anyone asks what’s the difference, the government working on a Saturday that too after 6pm is the difference.”
Here are the top points. Detailed Action Plan has been attached herewith:
Compliance regime based on self certification – To reduce regulatory burden, startups shall be allowed to self-certify compliance with labour and environment laws. In case of labour laws, no inspection will be conducted for three years. In case of environment laws, startups under ‘white’ category would be able to self certify compliance.Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years. Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.
In case of environment laws, Startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases.
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, 194
Environment Laws:
• The Water (Prevention & Control of Pollution) Act, 1974
• The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
• The Air (Prevention & Control of Pollution) Act, 1981
Startup India hub – Will be single-point of contact and hand-holding.
Simplifying the startup process – A startup will be to able to set up by just filling up a short form through a mobile app and online portal that will be launched in April.
Patent protection – PM Modi said patent protection and IP rights are a major concern for Indian startups. The government will make IPR procedure transparent for stratups. Fast track mechanisms of startup patent applications – in order to allow startups to realise the value of their IPRs at the earliest possible. Patent applications of the startups shall be fast tracked for examination and disposal.
Panel of facilitators to provide legal support and assist in filing of patent application– Facilitators shall provide assistance for startups in filing and disposal of patent applications related to patents, trademarks and design under relevant Acts. Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a startup may file.
80% rebate on filing patent applications by startups – To enable startups to reduce costs in their crucial formative years, startups shall be provided an 80% rebate in filing patents vis-a-vis other companies.
Relaxed norms of public procurement for startups – to provide an equal platform to startups vis-a-vis the experienced startups/companies in public procurement, startups (in the manufacturing sector) shall be exempted from the criteria of prior ‘experience/turnover’ without any relaxation in quality standards or technical parameters.
Faster exits for startups – To make it easier for startups to exit, provision for fast-tracking closure of businesses have been included in ‘The insolvency and Bankrupcy Bill 2015’. Startups with simple debt structures may be wound up within a period of 90 days from making of an application for winding up on a fast-track basis.
Funds of funds with a corpus of Rs 10,000 crore – To provide funding support for development and growth of innovation driven enterprises, Government will set up a fund with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over a period of 4 years.
Credit Guarantee Fund – To catalyse entrepreneurship through credit to innovators across all sections of society, credit guarantee mechanism through National Credit Guarantee Trust Company/SIDBI shall be rolled out with a budgetary corpus of Rs 500 cr per year for the next four years.
Exemption from Capital Gains Tax – Exemptions shall be given in case capital gains are invested in the fund of funds recognised by the government. In addition, existing capital gain tax exemption for investment in newly formed MSMEs by individuals shall be extended to all startups.
Tax exemption for startups – To promote growth of startups, profit of startups, set up after April 1,2016, shall be exempted from income-tax for a period of three years.
Tax exemption on investments above Fair Market Value – 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.
Startup fests – For showcasing innovation and providing a collaboration platform
Launch of Atal Innovation Mission
Entrepreneurship promotion via
Establishment of sector specific incubators
Establishment of 500 tinkering labs with 3D printers in universities
Pre-incubation training to potential entrepreneurs
Strengthening of existing incubation facilities
Seed funding to high growth startups
Innovation promotion via
Institution of innovation awards (three per state/UT) and three national level
Providing support to State Innovation councils for awareness creation and organising state level workshops/conferences
Launch of Grand Innovation Challenge Awards for finding low cost solution to India’s pressing and intractable problems
Setting up of 35 new incubators in institutions – Funding support of 40% (subject to a maximum of Rs 10 crore) shall be provided by central government for establishment of new incubators in existing institutions for which 40% funding by the respective state government and 20% funding by the private sector has been committed.
Setting up of 7 new research parks modeled on the research park at IIT Madras – Government shall set up seven new research parks – six in IITs, one in IISc with an initial investment of Rs 100 crore each. These parks shall enable companies with a research focus to set up base and leverage the expertise of academic/research institution. 31 centres of innovation, 13 startup centres and 18 technology business incubators in national institutions will be established.
Promote entrepreneurship in biotechnology – Five new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.
Innovation focused programmes for students – Innovation core program shall be initiated to target school kids with an outreach to 10 lakh innovations from five lakh schools. A Grand Challenge Program (National Initiative for Developing and Harnessing Innovations) to support and award Rs 10 lakhs to 20 student innovations from Innovation and Entrepreneurship Development Centres. Uchhattar Avishkar Yojana has earmarked Rs 250 crore per annum towards fostering ‘very high quality’ research amongst IIT students.
