Final-Start Up India
Final-Start Up India
INTRODUCTION
A new business venture which is in its initial stage of operation and beginning
to grow and derives its finances from an individual or a small group of
individuals can be defined as a startup. It’s a scalable business model with
technology, innovation and entrepreneurial instinct as its backbone. Startups are
ideas that manifests into commercial undertaking and takes a monetary form
and creates value.
Definition of a startup :-
Any legal entity will be identified as a startup if:
It is registered or incorporated not prior to 7 years
If its turnover does not exceed 25 crores in the last 5 years
If it’s working towards innovation, development, deployment, and
commercialisation of new products, processes, or services driven by
technology or intellectual property.
Registration for a Start Up can be done only by the following entities :-
Partnership firm
Limited liability partnership firm
Private limited company
The startup environment in India has been picking up. People are no more alien
to the concept and functioning of a startup. Startups have been a major
contributor in national growth and has been a significant part of the Indian
Economy. According to NASSCOM report of 2015, India housed 3100 startups
and has been growing ever since.
Since 2014, start-ups have collectively raised $50 billion across 3,700+ deals.
There are 250+ quality accelerator-incubator systems, and about 500
institutional and 2,000 active investors. The ecosystem has already yielded 500+
acquisitions and created 750,000 jobs. Bengaluru, Mumbai, and Delhi-NCR
house 50 percent of all active start-ups, and have emerged as global
players. With 39,000+ start-ups and 33+ unicorns, India is today home to the
third largest start-up ecosystem, behind only the US and China. Projections
indicate that by 2025, India may well have 100,000+ start-ups, employ 3.25+
million, and produce 100+ unicorns, with a total market value north of $500
billion.
Amidst all this, it was critical for the Government to help foster the growth of
start-ups further and hence the policy, Start-up India.
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 taken on 16th of January,
2016 by Hon’ble Prime Minister aims to empower startups to grow through
innovation and design. Several programs have been undertaken since the launch
of the initiative.
The scheme has been initiated to help the people, who want to start their own
business. These people have ideas and capability so government will give them
support to make sure they can implement their idea and grow.
Start-up India is an initiative by the Government of India in order to help foster
the growth of start-up ecosystem in India. It was announced on 15th August
2015 by the Prime Minister.
The action plan under the initiative is focusing on three prime areas:
RESEARCH PROPOSAL
In this research paper we have tried to understand the initiative taken by the
government in January 2016 known as ‘Start Up India, Stand Up India’ which is
popularly known as ‘Start Up India’. We have studied about the various benefits
that government has promised to the Start Ups operating in India and how the
government would help them by funding the ones who require capital. In the
course of research for this project our objective was to find out how the schemes
under Start Up India are actually being implemented on ground level for which
we interviewed 10 people who were engaged in the Start Up industry and
understood from them the reality of the implementation of Start Up India, and
whether they were actually receiving any benefits or no.
RESEARCH METHODOLOGY
We have used the method of ‘Interview’ to collect information from the people
engaged in the Start Up industry. Through this we got an understanding about
the awareness about the schemes under the Start up India among the people
actually engaged in the Start Up industry. Through the interviews we have also
got an idea of the actual implementation of the schemes on ground level
whether this initiative is helping the Start Ups or no, and if no then what are the
reasons behind it. We have then compared the information we got from the
interviews and what the government is giving at a macro level.
LITERATURE REVIEW
1. Abhijit Sarkar (2017)
This paper by Abrajhit Sarkar discusses the salient features of start-up India.
The writer has stated that India has declared 2010-20 as the Decade of
Innovation and that the Government has stressed the need to vocalize a policy
to synergize science, technology & innovation and has also established the
National Innovation Council (NIC). He also highlights the governments course
for Startup India which includes
No capital gain if money is invested in another start up
Set up of Startup India hub for clearance
Mobile apps and portals for registration
New Intellectual Property Rights Protection
80% reduction in patent free and fast tracking patent examination.
6. Kamaldeep Kaur
In his paper “Startup India: Challenges & Opportunities” talks about the surge
of start-ups and innovation in India in recent years. Funding is a major concern
in the start-up ecosystem and in recent years India has seen an increase in
Start Up Funding. Initiatives such as Start Up India by the Government is
helping in increased momentum in the growth in this sector. But there are
some challenges that is being faced by the Government in the implementation
of the initiative. Multi Window clearances and complex taxation assessment
frameworks are the greatest challenges and government has to make some
major changes in order to ensure smooth implementation of Start Up India and
help in growth of startups.
7. Manu Tyagi
In his paper “Overview of Startup Policies in India- With Special Reference to
Artificial Intelligence” talks about the advantages and incentives given to the
startups in India by the government. Startup India helps by solving queries and
provide handholding support to Startups. There are patent and tax benefits
given to startups under this initiative. Various Research parks are also being
made under the initiative to help foster R&D. Artificial intelligence can make a
major contribution in inventory management, data management, sales
process, customer understanding etc. Given the technological dependence and
operation of start-ups artificial intelligence can play a major role in
improvement of their functioning. According to World Bank Report, Indian
businesses need to make 33 tax payments annually with around 243 hours
spent to prepare and pay taxes in a year. There is a need for better
mentorship, market structure and technological infrastructure in order to
ensure success of the initiative and growth of Indian startups.
The writers in the above research paper have focused on how the technology
has a predefined role to play in Startups. The Internet-led industry contributes
$30 billion today, which is a fraction of the $250 billion by 2020. USA internet
business could grow from $240 trillion today to $3.5 trillion and China from
$700 billion to 1.5 trillion during the same period. The sheer size of change
that Startups can choose to bring is mammoth and exponential.
Startup India has been promised an initial capital of 10K crore over a period of
four years from the government. This seed capital is capable of attracting
tenfold investment by 2022. Credit guarantee for startup lending is another
booster. This research paper found that respondents supported the idea of
funding for incubation centers. The Government proposal do so, across
Universities, innovation movements, research parks and industry parks is on
similar lines. The promise of an initial capital of ten thousand crores over a
period of four years from the government is capable of attracting tenfold
investment by 2022. Credit guarantee for startup lending is the booster dose
required to galvanize Indian industry. However, this research is limited to 135
respondents in Mumbai. A broader base of respondents is always desirable.
Further research could be conducted on respondents from other metropolitan
cities.
The Prime Minister unveiled a 19-point agenda to take forward the startup
culture. The action plan included tasops, ease-of-doing business, innovation to
help entrepreneurs to startup and grow their business(Forbes India, Startup
India, January 18, 2016).
10.Inakshi
The author is her research papers briefly talks about the start upindia scheme,
its strategies, opportunities, current scenario and challenges faced by this
scheme which the whole world witnessed on Saturday (16January, 2016).She
starts by talking about what the startup scheme is and what is a start up and
about how to accelerate spreading of the Start-up movement. The studies get
into Entrepreneurship and Innovation. An entrepreneur is someone who
combines various factors of production to produce a socially viable product. An
entrepreneur can be defined as a person who has the skill of taking initiative
and has the motivation to set up a business or enterprise of his own and who
always looks for big achievements. Innovation can be defined as the
application of new ideas to the products, processes, or other activities of a firm
that lead to increase in value.
She mentions how a lot of Start-ups were unable to reach their full potential
due to limited guidance and access. And hence the Government of India hence
took some measures to improve the ease of doing business and also built an
exciting and enabling environment for these Start-ups, with the launch of the
Start-up India movement. The starts ups were also provided with an
environment where they could easily work with the Central & State
governments, Indian and foreign VCs, angel networks, banks, incubators, legal
partners, consultants, universities and R&D institutions. Start-ups require
registration with relevant regulatory authorities. Delays or lack of clarity in the
registration process may lead to delays in establishment and operations of
Start-ups, thereby reducing the ability of the business to get bank loans.
It was a step taken to assist start ups in succeeding. Under the initiative, Start-
ups were exempted from payingincome tax on their income for the first 3
years. Around 80% rebate was provided on filing a patentapplication. The
system for patent filing was made fast track. There was an exemption of tax on
thecapital gains. A mobile app was launched to enable start-ups to get
registered within a day. The app alsoprovided a simple application form for the
registration. A web portal was also launched for issuesregarding clearances,
approvals and registrations.
However, the response to the scheme has been subtle. As per certain media
reports,the maincause has been procedural roadblocks.the participating
investors have to be registered with the Securitiesand Exchange Board of India.
But some of the biggest VCs aren’t, and the government has essential
lyshunned them.A lot of entrepreneurs and investors think that
demonetization and the lack ofexits in start-ups by investors are adding to the
trouble; After demonetization, the investors are afraid toexit their investment
due to slump in the IPOThis paper attempted to analyze the benefits and
challenges of the policy. According to theresearch done, we can conclude that
the initiative of the government brought a deep and last longingpositive spirit
in the country for all people young and old who wanted to pursue their dreams
of havingtheir own successful start-ups. This can be seen by the large number
of applications received by thegovernment. But, a large number of the media
reports reported that on inquiry they’ve understood thatthe benefits of the
policy have not been completely delivered as promised due to bottlenecks due
tocorruption and insufficiency.
Akanksha Dutta (2016) in her research paper studies the reasons for starting a
business and the influence of government cooperation. There are many factors
which influence the initial stage of the start-up like finance, land permissions,
environmental clearance, foreign investment proposals, legal aspect etc. She
throws light on the various steps taken by the government involving the 19
plan initiative for startups which includes self-certification, register through
app, patent protection, Rs 10,000 crore fund, National Credit Guarantee Trust
Company, no capital gains tax, no income tax for three years etc. She considers
that this initiative of start-ups pledge rapid approvals for starting the business,
easier exits, tax rebates and faster registration for the patents. To conclude the
author believes that, entrepreneurs are facing problems but still are rising like
a sun. They have the determination to setup and divert their energy to plan,
support and execute their dreams and contribute to the growth of the
economy.
Dr. K Sunanda (2017) in her research paper elucidates the initiatives taken by
government of India for startup companies and studies the different steps
taken in establishment of Startups. She highlights the initiatives taken by the
government for startup India, some of them being the Tax exemption for
investments of higher value, Building entrepreneurs, Atal Innovation Mission,
Setting up incubators, Research parks etc. She also deciphers the ways to
manage startups in order to avoid failures. According to her for any new idea
to become successful venture it requires appropriate support and mentoring
and at present startups are growing like a grapevine. Indian start-ups attempt
to build the startup environment with important education, talent, innovation
and incubators with correspondence to funding agencies.
Omid Sharifi, BentolhodaKarbalaei Hossain (2015) Qin their paper stated that
the various financial challenges faced by the Startups in India. It also depicts
the difficulties faced by the startups at the initial stage. The key findings are
major leap in technology have led investors to raise the bar in terms of how
much leg work entrepreneurs are expected to do before even pitching their
companies.
Through this study, the authors attempt to analyse the contribution of women
start-ups in economic development, and to know the various factors
responsible for encouraging women to become entrepreneurs. This study also
gives an insight into opportunity and prospect from start-up India, stand-up
India scheme of government to women entrepreneurs and challenges they
face. Start-up India is a stand-up India initiative by government in the form of
various tax rebates, exemptions, relaxed norms, easier exits and also readily
available credit to promote the culture of entrepreneurship by educating
women about their hidden potentials and strengths through entrepreneurial
orientation programmes, spreading awareness and consciousness amongst
women to upstage in the field of entrepreneurship by their creative and
innovative ideas, making them realize their important position in the society
and how they can contribute to the entire economy of the country. The study
was planned with the objectives of finding out the role of women start-up in
economic development, of examining the factors responsible for encouraging
women to become successful entrepreneurs, of studying the opportunities and
future prospects from start-up India, stand-up India for start-up women and of
critically examining the challenges faced by women entrepreneurs. It is also
stated through various sources that India is the most attractive country for
women in start-up as almost one third of India’s workforce comprises of
women.
This paper the author aims to understand the perception of youth (students)
towards Entrepreneurship, to analyse the awareness of different schemes of
Government of India among youth, to examine the awareness of Start-up India
Scheme among youth and to examine the relationship between
Entrepreneurship education and familiarity about Start-up India Scheme.The
research shows that 72% of the respondents were interestedto be an
entrepreneur. This could be because of having any family member into
sameprofession helps them to gain that level of understanding and
confidence tounderstand that stream really well. Other important
observation was out of 72%respondents, 68% of the respondents wanted
to start their own venture even though they had family business. This
concludes that the start-up culture in rise in thecountry among the youth.With
the previous result of majority of respondents wishing to start their
ownventure it would be mandatory to understand that the level of awareness
must be high.But hardly 59% of the respondents are aware about start-up
India scheme. The author via the chi-square test computes that there is
no relationship between entrepreneurship education and familiarity
regarding start up India scheme. This tells us that the institutes need to revise
the syllabus and include the recent updates happening in the society with the
government norms and schemes.
17.Dr Suniti Chandiok
In her research paper she aims understand the initiative and life cycle of Start-
up and tries to study the awareness about Start-ups in the light of recent
changesin Industry via sampling 145 respondents in Delhi NCR .She concluded
that the success of Start-up India campaign hinges on initiatives like faster and
easier registration of Companies, self-certification for many legal
requirements, zero inspection for three years, funding for patents, and speed
of patent protection. It is important to add provisions which aid the closure of
dead companies within 90 days. Indian lawmakers could do this under the new
bankruptcy bill. The central theme is that ease of starting and ending is critical
in the context high rate of start-up mortality. This research paper found that
respondents supported the idea of funding for incubation centres. The
Government proposal do so, across Universities, innovation movements,
research parks and industry parks is on similar lines. The promise of an initial
capital of ten thousand crores over a period of four years from the government
is capable of attracting tenfold investment by 2022. Credit guarantee for start-
up lending is the booster dose required to galvanize Indian industry. Incentives
in the form of tax holiday for three years are a benefit worth considering. It is
also apt to consider equating capital gains with the regime in the listed market.
Most importantly, foreign exchange regulations are to be in tune with investor
needs, so that the best do not register outside India. But in global market lots
of challenges on sustainability, technology, regulatory and financial etc
18.Jitender Pravesh ji
Jitender and Parvesh in this research paper studying about the influence of
government, the initiatives taken by govt. in this respect, importance of
starting startup and the problems faced by start-up India.In present time, start
ups are growing like a grapevine. Both male and females are getting into it.
Even females are coming with more ideas and they are taking the risk to
sustain their credibility. Indian start-ups attempt to build the start up
environment with important education, talent, innovation and incubators with
correspondence to funding agencies. Now the govt is also supporting the Start-
ups. According to Nasscom, India ranks third in global start-up ecosystem.
More than 65% growth is seen in the year 2015.Start-up is an opportunity for
an entrepreneur to educate and inspire others while some are thinking of how
to do and what to do. Although, entrepreneurs are facing problems but still
they are rising like a sun. They have the determination to setup and divert their
energy to plan, support and execute their dreams and contributing to the
growth of the economy. This new initiative of start-ups pledge rapid approvals
for starting the business, easier exits, tax rebates and faster registration for the
patents. This initiative holds the potential of creating the jobs when the
manufacturing sector is having a downfall. For any new idea to become
successful venture it requires appropriate support and mentor.
The author highlights the concept of Start-up India Campaign which was
started on 15th august, 2015. The basic purpose of this article is to put some
light on the start-ups and the initiative taken by the Indian govt. The
Incubation environment in India lags behind when compared with that of
countries like the USA, China, Brazil, etc. Majority of the incubators offering
incubation program lack structured mentoring. There is a mismatch when it
comes to the start-ups expectations from the incubators and the incubators
offerings. The author talks about how the incubators and Accelerators
continue to play an important role in the growth of the Indian startup
ecosystem. Witnessing a 40% year-on-year growth in the number of incubators
and accelerators in India, more opportunities are now available to start-ups.
Tier 2/Tier 3 cities are also seeing traction with 66% new incubators
established in 2016, thus impacting the roots of entrepreneurial ecosystem.
Academia plays the most crucial role in the growth of incubators with 30 new
academic incubations established in 2016. Initiatives by the central and state
governments will trigger the growth of incubators and accelerators in tier 2/3
cities and with corporates eyeing start-ups for innovation, more and more
sector-specific incubators and accelerators will continue to emerge in future.
The above research paper analyses the relationship between Start-ups and
Business Incubation. It explores the challenges faced by business incubators. It
aims understand the support extended by the government towards
incubators/accelerators.
This article mainly focusses on the on the challenges that the start-up India
campaign brings in practice. Start-ups and industry experts strongly felt that
there was never a more pressing need for Minimum Alternate Tax (MAT) to be
included as part of this tax break and for angel taxes to be struck down
completely. However, no such radical exception was made to the original
policies in the programme - neither on the imposition of MAT nor on angel
taxes, both of which would continue to haunt start-ups. Another problem with
the plan is that the benefit is only applicable to start-ups incorporated after
April 1, 2016. This means a vast majority of the start-ups formed before that
date are not eligible for the scheme. Previously mentioned angel tax would
also drive the investors away as it eats into the startups money. The country's
stringent tax regime has been one of the key reasons why businesses prefer to
keep their distance from starting operations in India. Startups also face the
challenge of systematic inefficiencies and corruption-related complications,
which more often than not, manifests itself in the form of convoluted dealings
with state and district administration for land allotment licenses and
certifications. On top of stringent tax policies the article also mentions that in
order to avail any benefit as a start-up, they have to follow a stringent set of
criteria to even register as a start-up with only a third qualifying as one.
However, despite the article stating all the shortcomings of the start-up India
programme , the article ends on a positive note that it will still give
entrepreneurship a much-needed boost in India.
This article by Shweta Modgil, sheds light on the question of how profitable the
Startup India scheme has been for start-ups in India by becoming a country
with a healthy ecosystem for the flourishing of these companies.
The writer highlights that Startup India was the first one of its kind scheme in
India to provide growth opportunities to this breed of entrepreneurs, who did
not belong to any powerful families, and help them bring their innovative
business ideas to life. The writer talks about all the initiatives taken by the
government to give a push to new entrepreneurs like compliance based on
self-certification, a mobile app to provide on-the-go accessibility for registering
startups with relevant agencies of the Government, creation of a Startup India
hub, legal support and fast-tracking patent examination at lower costs, tax
exemption for start-ups, providing funding support through a Fund of Funds
with a Corpus of Rs 10,000 Cr, and launching of Atal Innovation Mission. She
then goes on to compare the promised corpus to “Fund of Funds for start ups”
(FFS) at 10,000 crore rupees , with the actual where SIDBI has committed 1285
crore to 27 venture capitals who further disburse these funds to the start-ups.
The author also says that the DIPP was not impressed by the low disbursement
of funds under the scheme and was learnt to have undertaken before a
Parliamentary panel that it would not make any releases to SIDBI during FY18
and FY19. The reason being cited is “unspent balance”. The government had
set an ambitious target of creating 1.8 billion jobs under this scheme but has so
far created only 80,000.
According to the the article , various aspects of the Startup India scheme have
been enlisted along with benefits and effectiveness .
According to a survey of 15K startups, only 18% of the respondents said they
actually benefited from the Startup India scheme.
Overall, Startup India has provided a major push to the country’s
entrepreneurial and innovative spirit. According to Inc42’s State Of The Tech
Startup Ecosystem Report 2018, India now has 26 unicorns and more than 31
soonicorns. Overall, startups have created a value of $130 Bn.
At the core of the Startup India programme are the state startup policies,
which the states have started to take seriously under the overview and
guidance of Department of Industrial Policy and Promotion (DIPP) and the
Centre. The DIPP recently released the State Startup Rankings on the basis of
the Startup Policy Framework for 2018 under which Gujarat was rated the
‘Best-performing state’, while Karnataka, Rajasthan, Odisha, and Kerala took
the title of the ‘Top-performing states.’
One of the interesting aspects of these rankings was the DIPP’s effort to
highlight the strength and weaknesses of each state in a separate state report,
in which they highlighted the steps forward for the state to perform better.
With the introduction of the Fund of Funds worth INR 10,000 Cr, the Indian
government took the first step in making startups a viable means of livelihood
and not just ‘jugaad’ (a Hindi word meaning an improvised or impromptu
solution to something). Also, it made the youth of the country look at
entrepreneurship as a viable career option.
ANALYSIS
As a part of this analysis, we have first tried to examine the reason why people
are willing to start up their business in India. After this we have studied the
various benefits and funding that the government is providing under the
schemes of Start Up India, and then also looked at the actual implementation of
the schemes and the reasons why many of the entrepreneurs have actually not
availed the benefits under the schemes of Start Up India.
Reasons for new Start Ups in India :-
India is a good market for startups to operate in - Most of the startups we
interviewed were from various sectors like food & beverages,
Ayurveda & organic products, eco-friendly products, corporate training
centers, interior designers, financial service providers and artificial
intelligence solutions. All of them had one reason in common, i.e.
providing their unique products in the Indian market. Many of these
startups had a well-established product / service categorization which
they were offering at a very competitive price compared to their big
shot competitors. Some startups also had a range of international
products that they were offering, which were not easily available in
India. These startups could also provide better quality products and
even higher standards of customer service and satisfaction, since they
operate on a smaller scale.
Ability to branch out and do new things - These founders believe that
through their startups, they have the ability to try newer things, which
otherwise wouldn’t have been possible if employed in a company. They
believe that they can partner with fellow founders and work towards
achieving a common goal. Startup founders can also diversify into
newer unexplored branches and tap into those markets.
Tax holiday for 3 years - Startups will be exempted from income tax for
three years provided they get a certificate from the Inter-Ministerial
Board (IMB). Apart from this the government has also eased the norms
for angel tax.
Tax savings for investors - People investing their capital gains in the
venture funds setup by the government will get an exemption for the
same. This will help startups to attract more investors.
Easy exit - A startup can close its business within 90 days from the date
of application of winding up. MCA has notified Start Ups as ‘Fast
Track firms’ enabling them to wind up their operations in 90 days vis-
à-vis 180 days for other companies. An insolvency professional shall be
also be appointed for the company and it liquidation process and paying
off the creditors.
As of July 2019, in his speech Piyush Goyal revealed the progress report of
Start Up India, under which he said the following points :-
As part of the scheme, the government has mapped out 177 incubators,
360 mentors and 71 accelerators and also has a deal flow arrangement
with banks including Union Bank, Yes Bank, Axis Bank, among
others.
In total, 247 startups have received a total investment of INR 1625.73 Cr
under this scheme. The reply also revealed that government’s
contribution is equal to 2x the funds received by venture funds and this
is invested into DPIIT-recognised startups, but according to a survey of
15K startups, only 163 startups had benefited from the Fund of Funds
in the last three years till December 31, 2018, and the fund allocation
and distribution are coming down further.
As part of building intellectual property among startups in India, the
government in 2017 had launched a scheme where startups would be
eligible for 80% rebate in patent filing fees and 50% rebate in
trademark filing fees. Goyal said 1,496 patent applications have been
granted 80% rebate on filing fee while 2,761 trademark applications
have been granted a 50% rebate on the filing fee. And to help startups
in their applications for IP or trademark, 425 patent facilitators and 606
trademark facilitators have been empanelled to provide free-of-charge
services.
149 startups were exempted from tax for a period of 3 years and and 689
startups availed tax exemption on investments above fair market value.
The government had earlier announced that it planned to set up seven
research parks modelled after the Research Park at IIT Madras where
incubation and joint R&D efforts between academia and the industry
could take place. Goyal said that out of a total of INR 680 Cr, only INR
233 Cr have been disbursed till now.
The reasons why entrepreneurs are not getting benefits or why aren’t they
even trying to avail the benefits?
Tedious registration procedure :- Registration procedure for a firm and to
get a certificate of registration is a tedious and monotonous procedure.
For an LLP firm in Mumbai, the registration office is in Bandra, where
these new enterprises have to go in order to get their certificate of
registration. The procedure for this involves a lot of paperwork and
documentation. Also a lot of approvals need to be taken from different
authorities which becomes very difficult and time consuming. Some of
the people whom we interviewed said that it took them close to around
a year or two to get that certificate, while some said that they were in a
position to pay a CS to get the work done for them so they could obtain
the certificate in less than 3-4 months. So due to this reason many new
startups don’t try to get a certificate because the time, energy and
resources which gets utilised in this is immense. Now as these
enterprises are not certified they are not eligible to claim the benefits or
funding under the schemes of Start Up India.
Not feasible for Startups to spend time in this procedure :- Startups are of
a very small scale and they have a small team. Their first priority is to
focus on their main business rather than trying to avail the benefits
being provided by the government under ‘Start Up India’. These
enterprises face stiff competition in a market like India and if they don’t
focus on their product development, customer retention, marketing etc.,
they will fail and lose because of the competition. In such a scenario if
they spend their time availing the benefits which is a tedious and time
consuming process they will have to face losses. Most of the people
whom we interviewed were of the opinion that in a newly established
firm there is so much work to do, that they cannot afford to spend time
availing these benefits which many of them felt were not significant
and would not help.
Higher Tax rate :- Many startups are moving base to countries such as
Singapore die to low taxtation structure of 17% over there as compared
to 33% in India. Small businesses in India have to pay an 18% GST
reverse charge on foreign services such as hosting, database retrieval,
pay – per – use services, which has had a negative impact on the
startups forcing many to shut down. Start-ups and industry experts
strongly felt that there was never a more pressing need for Minimum
Alternate Tax (MAT) to be included as part of this tax break and for
angel taxes to be struck down completely. However, no such radical
exception was made to the original policies in the programme - neither
on the imposition of MAT nor on angel taxes, both of which would
continue to haunt start-ups
Innovation Criteria :- To avail the tax benefits, the Start Up enterprise
needs to be “innovative” in nature. Each startup is scrutinized by an
Inter-Ministerial Board (IMB) to see if the startup is ‘innovative’ – i.e.
if it is unique or a world first. But if the objective of the Startup India
initiative is to give a boost to new ventures, generate employment, and
promote creation of Indian intellectual property, then what’s the point
of setting up the IMB to be a major stumbling block, instead of
allowing the market to decide winners and losers? Consider this – per
the IMB’s logic, the following trailblazing startups would have been
denied benefits if they were being launched in India today – Google
was not the first search engine, Facebook was not the first social
network, and Apple was not the first company to make computers or
mobile phones. So bizarrely, per the IMB’s definition of ‘innovation’,
these companies would not be considered ‘innovative’, and hence
would not be ‘worthy’ of tax benefits.This IMB has in the course of
time turned down so many worthy startups and at times given the
benefits to some dubious startups who did not deserve those benefits.
This is a huge demotivating factor for the startups. As a result of this
they don’t feel like going and trying to avail tax benefits because they
feel that they will just end up wasting time and won’t get any tax
benefits.
Unawareness :- From among the people we interviewed who were
engaged in a newly established business, more than 50% of them were
unaware of the actual benefits which they could receive from the
schemes under startup India. Due to this unawareness even if an
entrepreneur was in need of funds, he would not know that government
is willing to provide help in funding. So it is evident that the knowledge
about the schemes under Start Up India has not reached the masses
well, so the government should try and educate the people and inform
them in a better way about the benefits that it is providing under this
scheme.
Slow procedure :- The Startup India scheme is divided under 2 parts, the
benefits from the Central government and from the State government.
One of the many people whom we interviewed in the course of this
project gave us a surprising fact, that his company had fulfilled the
eligibility criteria for tax benefit but it had been two years after that and
he had still not received the refund of his tax. The other people said that
the entire process is very monotonous, where in first they have to fill
the details online, after that they had to go to the government office and
submit the details offline as well, which makes the entire purpose of
online and easy procedure null and void. There were many other
complications in receiving funding as well which made it so time
consuming that the entrepreneurs felt that raising the capital from a
private Venture capitalist is an easier task. Overall red tapism and
beureaucracy made it difficult to get their work done smoothly. Most of
the interviewees said that the schemes under central government were
still in a better position and could be done, but the procedures under the
state government were extremely slow and inefficient.
Other social and political reasons: Another problem with the plan is that
the benefit is only applicable to start-ups incorporated after April 1, 2016.
This means a vast majority of the start-ups formed before that date are not
eligible for the scheme. Previously mentioned angel tax would also drive
the investors away as it eats into the start-up’s money. The country's
stringent tax regime has been one of the key reasons why businesses
prefer to keep their distance from starting operations in India. Start-ups
also face the challenge of systematic inefficiencies and corruption-related
complications, which more often than not, manifests itself in the form of
convoluted dealings with state and district administration for land
allotment licenses and certifications. On top of stringent tax policies, the
article also mentions that in order to avail any benefit as a start-up, they
have to follow a stringent set of criteria to even register as a start-up with
only a third qualifying as one.
RECOMMENDATIONS
From the information that we got from the interviewees, all of them had a few
recommendations on what changes can be done in order to make conditions
better for the Start Ups. From the information that we got from the study of this
project even we had a couple of recommendations.
Just because something is very hard to get, does not mean that
one should not put efforts to get it. It is a fact that startups are
prone to failure. The reason for that is very simple, innovation
either gets successes or face historical failure. There is nothing in
between. There is no doubt in anybody’s mind that, startups are
subject to various challenges and barrier in India, but the
environment is changing and government has started taking
startups very sincerely and made their development government’s
priority. The recent introduction of Startup India Initiative is a great
example of Indian government’s determination towards creating
India a startup hub of the world in 2020. For achieving those feet,
government of India along with other key stakeholder have to work
on a very comprehensive and cumbersome planning. There are
many dividends which can be reaped by founders of startups in
India; like huge market and young, educated workforce. The
suggestion to improve the startup scenario and making India the
next mother country of startups are as follows-
1) It is good to have an “Idea” but must have a plan
2) Find a mentor or consultant who can guide you step by step in
the journey of establishing as well running startup.
3) Proper management of resources and intellectual assets have
to be made sure.
4) Be competitive with the existing as well future rivals.
5) Let the systems grow
6) Founders have to Constantly educated themselves towards the
recent market trend and business management technique
7) Have a great team/band of people who share the same passion
and patience as founders do
8) Funds and its management has tobe taken care by someone
who has the expertise in it.
9) Founders must undertake a proper and cumbersome market
research related to their product and services to know the present
and future as well past tends of market/buying behaviour.
10) Do not forget your core strength as you embark upon the
journey of startup.
The pattern of startups and their founders has
shown a great link between their core interest/education/exposure
of founders and their startups. For example if somebody has
worked in an IT company or studied in IITs (As in India’s case,
maximum of founders are from IITs/IIMs), they are most likely to
start their startup related to IT only.
Make people aware of the policies - The biggest problem with Start Up
India is that people are unaware of how to actually avail the benefits
from government. Government should work on educating people on
how to avail these benefits and make startups aware the need to take
advantage from Start Up India.
Tax Feasibility - Since GST, filing tax returns has become a complicated
task as you have to file them monthly. This is very time consuming and
incur cost in accounting. Government should try to improve the
feasibility of taxes for startups.
Inclusion of start-ups formed April 1 2016 in the scheme for them to avail
the benefits as well, since currently only start-ups incorporated after April
1 2016 are the beneficiaries of the scheme.
CONCLUSION
From this project what we would conclude is that there have definitely been
positive impacts of Start up India on the new entrepreneurs in India but it did
not deliver upto the expectations. The government has made a lot of policies
and is taking a lot of initiatives but what is lagging is the way these initiatives
are being implemented. The government is making policies and schemes at a
macro level and is not considering the actual scenario in the Start Up space in
India and the problems and challenges that they are facing, had they realised
those challenges the policies formed and initiatives taken by them would be
focused at a microscopic level and how can it help solve problems at that level.
The implementation is still a problem which is causing this Start Up India
initiative to under deliver and a major reason for it is the government offices
and their laid back attitude, red tapism and bureaucracy.
BIBLIOGRAPHY
Research Papers :
Dr C Shekhar Upadhyay, Dr Priyanka Rawal (2017), Start-Ups; let’s start them
up – An inside view of the Indian Start-Up Scenario, International Journal for
Research in Applied Science and Engineering Technology (IJRASET)
Akanksha Dutta (2016), Start-up Initiative, IOSR Journal of Business and
Management
Dr K Sunanda (2017), How to Start and Manage StartUp Companies in India, a
Case Study Approach, International Journal of Engineering Development and
Research (IJEDR)
Omid Sharifi, Bentolhoda Karbalaei Hossein (2015), Understanding the
Financing Challenges Faced by Startups in India, International Journal of
Service Technology and Management (IJSTM)
Abhrajit Sarkar (2017), Start-Up India – A New Paradigm for Young
Entrepreneurs, Social Science Research Network (SSRN)
Anurag Garg (2016), StartUps in India – Financial Challenges, International
Journal of Research
Sarika Sharma, Mrinal Raj, Tanya Gandhi (2019), Challenges and Issues Faced
by StartUp companies in India, Sixteenth AIMS International Conference on
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Surbhi Jain (2018), Growth of Startup Ecosystem in India, International Journal
of Applied Research 2(12)
Dr Suniti Chandiok (2016), India the World’s Fastest Growing StartUp
Ecosystem, Amity Research Journal of Tourism, Aviation and Hospitality
Inakshi (2017), Start-up India: Strategies, Opportunities and Challenges, Journal
of Modern Management & Entrepreneurship (JMME)
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programme-heres-the-numberspeak/
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standup-india-stand-now-18345
https://cleartax.in/s/11-benefits-to-startups-by-indian-government