Is providing incentives to Indian SMBs and startups a good enough solution

The SMBs and startups are however often seen struggling  in order to comply with the changing government rules and the  regulations. Something which is however  as big as GST, liquor ban, demonetization and also  VAT can however completely shake-up the  small-business owners which is however due to their complexity and also  lack of approachability to the  government authorities.

The purpose of this article is to make the reader aware of the fact that whether providing the incentives to Indian SMBs and startups a good enough solution or not .

The policy changes such as GST etc are however considered as the  crucial industry challenges, and this is especially for the SMBs. If startups or either the  SMBs are however  failing in order  to adapt to these kind of  policy changes it’s thus  more of a fault at the government’s part which is thus  not on the startups part. However, now the focus has thus changed and one only wants  to ease the process for the  business owners.

The small companies however don’t have the required amount of money in order to facilitate the government policies, there is however the lack of the  know-how’s of compliances. India is thus  not a one-market. The logistics decisions are thus  not always  taken on a  pure logic.. sometimes they are thus however  taken based as to  on which state has lower tax, VAT and also the other things. But however now GST will thus treat India as one market.

Prime Minister Narendra Modi has however unveiled a slew of the incentives in order  to boost the startups in January as a  part of the Startup India Initiative. A corpus which is of Rs. 10,000 Crore corpus which is however for the  innovation-driven enterprises, a Rs. 500 crore per year credit guarantee mechanism and also a  3 year break from however  paying the  income tax on profits were however introduced. Capital gains thus also use tax exemption for  the start-ups  which was also introduced along with the range of incentives which are thus  enumerated below.

Action Plan for the Startups

An action plan in order to help the  entrepreneurs so that they thus  play a transformative role in the India’s development was however unveiled. Businesses till date however were required to comply with the various central and the  state laws which were pertaining to the labor and environment. Non-compliance with these kind of  laws however would result in the  severe penalties and fines. Also , In order to do away with these kind of  complex procedures, startups would also thus now be able in order to self-certify their compliance requirements with the  nine labor and also  environmental laws without however  being inspected periodically as is thus the norm currently and also  receive faster approvals. Compliance would thus also be checked only if there is tus  a written complaint against the startup.

Startups will thus also  obtain an 80 percent rebate in the patent registration fees as it is compared to the  other companies in order  to protect the intellectual property. Startups are also considered as  high risk ventures and thus about 90 percent of the  startups fail currently.

Tax Exemption

Also , ‘Entrepreneur-friendly taxation regime’ would however  be introduced for the  startups in order  to ease the tax burden which is on them. Tax exemption which is  under the  three different schemes have however  been provided as part of the action plan. According to the  Budget 2016, it has however  been proposed in order  to insert a new Section 54EE in order to provide an exemption from the  capital gains tax if the long term capital gains proceeds are however invested by an assessee in the  units of specified funds which is thus subject to the condition that the amount however  remains invested for the  three years failing which the exemption shall be however be withdrawn. The investment which is in the units of the specified fund shall however be allowed up to Rs. 50 lakh. It is thus  also proposed in order to amend section 54GB however  so as to provide thus relief to an individual who is willing in order to setup a company by however  selling a residential property in order  to invest the shares of such kind of  company.  The amended section would thus also provide that long term capital gains which are however  arising on an  account of the transfer of a residential property shall thus also is  not required to be charged to tax if such kind of  capital gains are however  invested in the subscription of kind of shares of a company which however qualifies to be an eligible start-up.

Other Incentives

Other incentives thus also include a new scheme for the  intellectual property rights for the protection and also faster registration of patents. The government thus  also intends in order  to set up the  facilitation centres for the provision of the free legal advice and also  other support to the small business in order to help them with the  compliance requirements. Procurement norms are thus  also proposed  to be relaxed in order to ensure that the  startups are however  able to participate and also compete with the established businesses. Policies in order  to enable the  women entrepreneurs, sector specific incubators and also  the establishment of the  bio clusters for the biotech sector are thus also  some of the other highlights. Investments which are however  by the  incubators which is  above the fair market value would thus  be exempted in the  line which is with the current exemption which is however available to the venture capital funds in order  to invest in startups above the FMV. Funding support which are however  upto Rs. 10 crore would thus  be provided in order  to set up the  new incubators while the  individual states and the private sector would however provide 40 percent and 20 percent respectively.

We  thus definitely are required to encourage the  smaller business but we however also need to re-think as to  how we go about doing this. The current regime is thus working in parts, but it’s however still not up to the mark.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for GST software, GST Return Filing, GST Registration, Section 8 company registration, Nidhi company registration, IEC registration.


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