Definition of Start – up (Will my entity qualify as Start - up?)

In order to avail the benefits under the Action Plan for start - ups, any entity seeking such benefits should qualify as a start - up.  Let us analyse the entities that would qualify as a start - up and the conditions that the entities need to satisfy for availing the various benefits under the Start - up  policy released by the Government.

Definition of Start - Up

The Government of India issued a notification[2] (Notification) which defines Startup[3] as any entity incorporated or registered in India as a (i) pri­vate limited company; or (ii) limited liability partnership; or (iii) registered partnership firm which satisfies the following conditions:

a.       It has not completed five years from the date of its incorporation/registration

b.      Its turnover for any of the financial years has not exceeded Rupees 25 crore, and

c.  It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property[4];

d.    Such entity is not formed by splitting up, or reconstruction, of a business already in existence.

Other conditions:

i.      The entity is not formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘startup’;

ii.    In order to obtain tax benefits, a startup so identified under the above definition shall be required to obtain a certificate of an eligible business from the Inter-Ministerial Board[6].

Thus, the requirement of Inter - ministerial Boar approval arises only in the case of startups seeking benefits under I.Tax Act and not for IPR related benefits as stipulated under the Action Plan.

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[1] Entity means a private limited company (as defined in the Companies Act, 2013), or a registered partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2002).

[2] Notification dated 17.02.2016 issued by Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), which has adopted the definition provided in the Action Plan.

[3] The definition is similar to the definition of Startup under the Action Plan except that the

[4] An entity is considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize: a. A new product or service or process, or b. A significantly improved existing product or service or process, that will create or add value for customers or workflow. Provided that the mere act of developing: a. products or services or processes which do not have potential for commercialization, or b. undifferentiated products or services or processes, or c. products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition.

[5] See, notification dated February 17, 2016 issued by the Ministry of Commerce and Industry.

[6] The Inter – Ministerial Board shall consist of: a) Joint Secretary, Department of Industrial Policy and Promotion, b) Representative of Department of Science and Technology, and c) Representative of Department of Biotechnology.