Have new idea, let’s start-up?

The pandemic although has been an extremely punishing times for modern world economy it also presented innumerable and unimaginable opportunities to the start-ups, small and mid sized technology sector businesses. Given the changing market scenarios this momentum seems to continue favouring the new start ups, MSME and even some multinational companies. At this juncture, it is crucial to seize and adapt to such opportunities that have arisen and shall arise in the post-COVID-19 world.

For any business to seize an opportunity and in order to succeed several factors are a must. These factors include favourable government policies, cohesive demand and supply trends, product/service placement/advertisement and most importantly a unique or exceptional business idea backed by sufficient funds. In our country, currently these factors evidently are on a boom partly due to the favourable schemes and policies of the government and partly due to Social Media Platforms. If analysed, understood and utilised efficiently this might be the “Right” time to turn viable, unique, innovative and job generating ideas into big realities.

Keeping this in view, this article shall focus on the aspects which must be considered for starting a startup.:

Government of India has introduced Start Up India Scheme on 16th January, 2016 with the goal of driving financial development of the economy by way of job creation by creating a dynamic and conducive Start-Up ecosystem. Under this scheme, an entity shall be considered a Start up if it incorporates as Private limited company or a registered partnership firm or a limited liability partnership firm and is not older than 10 years from the date of incorporation, its total turnover has not exceeded 100 crore INR since incorporation and should be working towards innovation, development or improvement of products or processes or services or it has high potential of employment generation. The scheme has been introduced with the idea of providing funding support, incentives, industry-academia partnerships, incubation, and hands-on support to small business start-ups. To attain the full potential of the scheme the GOI is providing the following benefits to the Start Ups in the Country:

BENEFITS OF START UP INDIA: -

a. Intellectual Property Rights (IPR) benefits
The scheme provides access to IPR services and resources which includes:
• Fast-tracking of start-up patent applications
• Panel of facilitators to assist in IP applications
• 80% Rebate on filing of application on Patent Costs
• 50% Rebate on filing of Trademark applications

b. Relaxation in public procurements norms
Under the scheme, the GOI has authorised its ministries, departments and PSUs to relax norms in all public procurements and Startups have been entitled to avail exemption on:
• Prior Turnover
• Prior Experience
• Earnest Money Deposit
If recognised by the DPIIT the statrtups can also become preferred bidders on CPPP portals.

c. Self-certification under Labour & Environment laws
The GOI has launched a landmark initiative of self certification of start-ups under this scheme. Startups can now Self certify their compliance with 6 labour laws and 3 environment laws for a period of 3 years from the Date of incorporation of the start up. Only in cases of credible and verifiable complaint of violation will there be an inspection on such a start up. This gives a breather to the Start ups from harrowing bureaucratic burdens atleast in the initial 3 years of the Start up.

d. Tax Exemption
The recognised start-ups having an Inter-Ministerial Board Certificate are exempted from payment of income tax for three consecutive years out of the ten years since incorporation. Any Start-Up incorporated on or after April, 2016 can avail the benefit of tax exemption under the Income Tax Act.

e. Faster exit for Start-ups
The Ministry of Corporate Affairs by a notification has notified Start-Ups as ‘Fast Track Firms’ and has enabled them to Wind Up their operations within 90 days in cases where the Start Up has simple debt structure or those meeting such criteria as may be specified. Even though Winding Up is dreadful event for any business this facility of the scheme shall allow the entrepreneurs to quickly withdraw and reallocate their funds into profitable arenas.

f. Seed Fund Scheme
On 16th January 2021, Hon'ble Prime Minister announced the Start Up India Seed Fund scheme at the Start-up India International Summit "Prarambh" with an investment of INR 945 crore. This scheme aims at providing financial assistance to start ups for proof of concept, prototype development, product trials, market, entry and commercialization. As a result, these start-ups would be able to raise money from angel investors and venture capitalists, or obtain loans from commercial banks and financial institutions. The only caveat for a startup for receiving this seed fund shall be that they have to be recognised as eligible start ups from the eligible incubators spread across the country.

Conclusion:
With the Start Up India initiative and the required regulatory easing, in addition to tax exemptions and seed funding scheme, the future of budding start ups looks promising. One cannot ignore the fact that favourable business environment helps in long term sustainability of businesses and during these challenging times this, much needed push by the Government to the nurture the start up culture of the country is a step in the right direction. Young entrepreneurs with these benefits and the ease of doing of business can turn their small ideas into Big realities and eventually boost the country’s economy.

-By Shilpa D. (Partner)
Hetvi Shah (Associate)
Sollicitus Lex