It has been a year now since Prime Minister Narendra Modi launched the Startup India scheme on the 16th of January, 2016. However, the response to the scheme has been lukewarm. As per certain media reports, less than 1,500 startups have so far applied for registration under the scheme, around 500 were recognised as startups, and only about 100 became eligible for tax benefits.
We can be certain that these were not the numbers that the government had in mind for the provision of benefits, especially with a scheme of this scale, a pet project of the Prime Minister himself that was first coined in his Independence Day speech of 2015, heard across the country and even abroad.
The entities registered as startups are primarily eligible for the following benefits:
To avail of these benefits, the startup needs to have the following:
As a result of so many ifs and buts, till date, only a handful of startups, approximately 100, have been able to get themselves recognised as eligible businesses to claim tax benefits under the Startup India scheme.
The root cause has been procedural bottlenecks. The startup selection and registration process is not automatic or system-driven. Rather, the approval process involves a lot of human intervention and discretionary powers, which again opens the way for red-tape and corruption.
Even the application for registration under the scheme is lukewarm and drying up because of the following reasons:
In the given circumstances, a very promising scheme seems to be going nowhere and will benefit only a handful of startups that have clout with the VCs, incubators or Inter-Ministerial board.
The following were the objectives of the government for launching the Startup India scheme:
In our opinion, to do all the above in the long run, the government should focus more on the simplification of tax laws rather than on further complicating them. It should look at lesser discretionary powers for the government machinery and system-driven online approvals registrations, thereby creating a more conducive environment for industry and commerce. A conducive business environment and ease of doing business shall automatically boost startups and industries in all sectors, which will fulfill all the above stated objectives of the government. Some of the steps that the government should, in our opinion, take in this budget are as follows:
Further, the other benefits coined in the scheme such as (1) Self certification, (2) Handholding and support, (3) Single window approvals, (4) Simplified and online processes, and (5) Rebate and fast tracked IP application, should be standard across the industry and different government departments. It should not be limited to a particular scheme or sector.
On funding support, we feel that we already have banks and financial institutions for debt financing. Equity financing should be left open to market forces, with the government only arranging for a conducive and enabling environment for businesses to grow on their own, and not by interfering in things in which it does not have any expertise. Remember, the objective of this government is ‘Maximum Governance’ and ‘Minimum Government’.