The Department of Industrial Policy and Promotion (DIPP) could utilise only Rs 4 lakh as on December 31, 2017 out of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18, a parliamentary committee noted in its latest report.
“The committee fears that optimal functioning of the Startup India Hub and call centre was hampered due to such tardy utilisation of funds,” the Department Related Parliamentary Standing Committee on Commerce said in its report presented on March 14.
The Committee expressed concerns about the “huge gap” that exists between the number of startups receiving funding, tax exemptions and the number of such entities that have been recognised. “A total of 6,981 startups have been recognised by DIPP as on 06.02.2018 out of which only 99 startups have been funded and 82 startups have been certified for claiming tax exemptions under Income Tax Act, 1961,” the panel observed in its report. The DIPP has set targets to facilitate and support 1,000 startups by March 2019.
Asking the DIPP to furnish reasons for the lag in funding recognised startups, the Committee suggested the department to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs.”
The proposed Rs 2,000 crore Credit Guarantee Fund for startups, announced in January 2016, “is still in the formulation stage and there has been no progress made as the fund has been again allocated a token amount (of Rs 1 lakh) in Budget Estimate of 2018-19,” it said.
The StartUp India campaign was announced by Prime Minister Narendra Modi on August 15, 2015 to develop an ecosystem to galvanise entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.
What is a startup?
A private limited company, registered partnership firm or limited liability partnership — shall be considered a startup for up to 7 years from the date of its incorporation/registration, 10 years for biotechnology sector. Its turnover should not exceed Rs 25 crore in any of the financial year. Such an entity should be working towards innovation and commercialisation of new products, processes or services, with high potential for job creation.
What are the benefits?
Under the action plan for StartUp India, the government in January 2016 announced incentives including a Rs 10,000 crore Fund of Funds (FFS) to be provided by March 2025 by SIDBI, a exemption from paying income tax on profits for three years and exemption from capital gains tax for start-ups. A Rs 500-crore per year credit guarantee scheme for startups was also announced to enable them to raise loans without any collateral for business purposes. As on September 15, 2017, SIDBI’s Fund of Fund for StartUps has sanctioned Rs 605.70 crore to 17 funds for investment in 72 entities. However, till last August, only about Rs 70 crore was disbursed.
How can a startup obtain the tax benefits?
To obtain tax benefits, a Startup is required to be certified as an eligible business from the Inter-Ministerial Board of Certification, comprising a senior official each from DIPP, Department of Science and Technology, Department of Bio-technology and Ministry of Electronics and Information Technology.