No 2nd chance for start-ups that did not get tax sops

Amiti Sen New Delhi | Updated on January 15, 2018

Independent groups re-examining rejected applications find no fault with decision of inter-ministerial group

Start-ups found ineligible for tax benefits by the inter-ministerial board (IMB) will not get a second chance.

The independent groups, set up to re-examine the proposals rejected by the IMB, has largely backed the original decision of the IMB.

“Although the number of rejections of applications by start-ups for tax sops is large, the Department of Industrial Policy & Promotion is now reassured that it has nothing to do with a flaw or bias in the examination process. It was because the start-ups did not meet the criteria of innovation,” a government official told BusinessLine.

There was some hope for the 190 start-ups that had their applications for tax exemption rejected by the IMB when DIPP Secretary Ramesh Abhishek announced last month that he would get them re-examined. Abhishek wanted a re-examination as only 10 proposals out of 208 had qualified for the exemption.

But, the independent groups comprising investors, incubators and area experts put together by the DIPP for the purpose of re-examination largely agreed with the IMB’s conclusion that they did not deserve the benefits as they did not meet the basic criteria of innovation, the official said.

“The only mandate for acceptance or rejection of proposals is that the idea has to be innovative. The IMB’s rejections were mainly because most of the applications for tax exemption were for technologies that were app-based and the apps were already available in the market,” the official added.

The IMB includes officials from the DIPP, the Department of Science and Technology, and Department of Biotechnology.

Under the Start-up India scheme, eligible enterprises are allowed a three-year income tax exemption which the start-ups can avail in a block of seven years.

While one of the criteria for eligibility is innovation, the other is that all such start-ups should have been incorporated after the cut-off date of April 1, 2016. The DIPP is trying to convince the Finance Ministry to push the date backwards so that more start-ups qualify.

Moving cut-off date

“Although it is difficult to make concessions on the innovation criteria, if the cut-off date is moved back many more start-ups would qualify for tax exemption.

“The DIPP has made a renewed push for this and we are hoping that the Finance Ministry would agree to it,” the official said.

Of the 2,408 applications received for recognition, 742 had the required documents and have been recognised as start-ups by DIPP.

Published on April 12, 2017

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