Startup Policy Rundown
With several new policies and measures being introduced every month for the benefit of the ecosystem and industries, Inc42 summarises all the latest policies and announcements and their impact.
In September 2019 too, India’s finance ministry continued with policy reform initiatives along with undoing the damage done by Union Budget 2019. However, the policy measures remained a mixed affair at large. While finance minister Nirmala Sitharaman announced the reversal of the Budget proposal to levy a higher surcharge on capital gains arising from short- and long-term dealings, on the other end, it simply banned e-cigarettes in the Indian market, despite protests from many startups about the stringent move.
The cabinet has approved Promulgation of the Prohibition of E-cigarettes Ordinance, 2019, under which any production, manufacturing, import, export, transport, sale (including online sale), distribution or advertisement (including online advertisement) of e-cigarettes shall be a cognisable offence punishable with an imprisonment of up to one year or fine up to INR 1 lakh or both for the first offence; and imprisonment of up to three years and fine up to INR 5 lakh for a subsequent offence. Storage of electronic-cigarettes shall also be punishable with imprisonment up to 6 months or fine up to INR 50,000 or both.
This policy garnered widespread criticism as there has not been even a single death due to the consumption of e-cigarettes, vaping in India, over 1 Mn Indians die every year due to tobacco consumption and the Indian government instead of banning cigarettes actually sells it. Yes, the Indian govt owns stakes in Indian Tobacco Company (ITC Ltd), Asia’s most valuable tobacco company.
The FM also slashed corporate tax rates to 15% for new domestic manufacturing companies.
Let’s take a took at startup policy initiatives taken this month.
“Handle With Care” India’s Tax Watchdog Says
The Central Board of Direct Taxes (CBDT), on September 26, issued a circular asking income tax officers to handle startup-related issues with “utmost care”.
The circular has been sent to all regional chiefs of the Income Tax Department. CBDT has told the taxmen to sensitise its officers on how to handle startup issues. The order also asked the regional heads of the IT Department to constitute a startup cell at their offices.
The CBDT order, issued on Monday, has given fresh directions for handling grievances of startups in India, under a new policy.
This is in sync with Sitharaman’s announcement that Section 56(2)(viib) of the Income Tax Act 1961 would not be applicable to the startups registered under DPIIT. Section 56 (2) (vii)(b) of the Income Tax Act said that if a privately held company issues its shares at a price more than its fair market value, the amount received in excess of the fair market value will be taxed as income from other sources.
CCI Suggests Policymakers Make Careful Interventions In Startups, Tech
Identifying the growing potential of sectors that have adopted technology in India, Competition Commission of India (CCI) has said that even though there are several concerns, lawmakers should make careful interventions through policy in these sectors, which have thousands of active startups.
Addressing the gathering at CII Mergers Acquisitions and Restructuring Summit 2019 in Mumbai, Manish Mohan Govil, adviser and head of mergers and acquisitions, CCI said that India is a fast-growing internet and ecommerce market. He said that with rising internet penetration and greater digital maturity of internet users, the startup and internet economy of India is bound to grow faster. And at the same time policy around the Indian startup ecosystem also needs to take a balanced approach.
Karnataka Govt’s Vision Group In Tier 2, 3 Cities
Karnataka government has announced a Vision Group for startups to provide insights on strengthening the startup ecosystem in the state and focus on involving stakeholders from industry and academia.
The Vision Group is one of the many initiatives taken by the state government to boost the startup ecosystem, with a special focus on Tier 2 and Tier 3 cities of the state. Karnataka’s chief minister BS Yediyurappa has also urged the stakeholders to invest in cities like Mysuru, Mangaluru, Hubbali-Dharwad, Shivamogga and Belagavi.
“Our Government has adopted a multi-faceted approach to ensure Karnataka remains the national leader in innovation and enhances its place in the global economy. Our focus would be on skilling, incubating startups, developing global alliances, concentrating on Tier 2 cities and providing a legal framework for supporting innovation,” Deputy CM Dr Ashwath Narayan added.
The government also plans to establish a legal framework for innovation under the Karnataka Innovation Authority to enhance its position as a global innovator by encouraging new and emerging technologies in the state.
Tamil Nadu EV Policy: 100% Motor Vehicle Tax Exemption
Released last month, Tamil Nadu government’s state electric vehicle policy has proposed to promote EV startups along with introducing various incentives and concessions for the electric vehicle and battery manufacturers.
The policy noted that 100% motor vehicle tax exemption will be given to all-electric motorcycles, buses, three-wheelers and other freight vehicles till 2022.
Moreover, special concessions were introduced for the companies involved in the manufacturing of electric vehicles, spare parts, batteries, and charging infrastructure. These concessions include 15% capital subsidy for EV manufacturing and 20% for batteries.
To be eligible for these concessions under the new policy, companies and Indian startups need to have 50 employees and must have made about INR 50 Cr investment towards the manufacturing of battery and charging infrastructure till 2025.
Besides, Uttar Pradesh government has also launched a state EV policy, which is aimed at converting 70% of public transport vehicles to EVs by 2030. The state has also promised 100% waiver of the registration fee and road tax for the first 100K purchasers of EVs. Multiple state governments, including Kerala, Tamil Nadu, Uttar Pradesh, Telangana, and Delhi, have so far launched state-specific EV policies in the last year.
Higher Educational Institutions To Invest 1% Of Budget Into Innovation
As the Indian government plans to rank educational institutions based on indicators related to entrepreneurship development, according to the latest guidelines issued by the ministry of human resource development, higher educational institutions have to set aside at least 1% of their total annual budget for funding and supporting innovation and startups through creation of a so-called Innovation Fund. This new policy is expected to boost the presence of startups in India’s educational institutions.
The guidelines also state that the institutions need to create pre-incubation and incubation facilities which will have to be available 24X7 to the students and faculty members.