Lok Sabha Question No. 2321 (UNSTARRED), answered on 2024-12-10
Subject: Benefits of Startup India Initiative
Ministry: COMMERCE AND INDUSTRY
Asked by: Shri Manish Jaiswal, Shri Anup Sanjay Dhotre, Shri Miteshbhai Rameshbhai Patel, Smt. Bijuli Kalita Medhi

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 2321.

TO BE ANSWERED ON TUESDAY, THE 10 TH  DECEMBER, 2024.

## BENEFITS OF STARTUP INDIA INITIATIVE

## 2321.  SHRI MANISH JAISWAL:

SMT. BIJULI KALITA MEDHI:

SHRI MITESH PATEL BAKABHAI:

SHRI ANUP SANJAY DHOTRE:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य एवं उद्योग मंत्री

- (a) the measures taken by the Government towards ensuring that the benefits of the Startup India initiative, such as the Credit Guarantee Scheme for Startups and the Startup India Seed Fund Scheme, are effectively reaching startups in tier II and tier III cities;
- (b) whether  the  strategies  adopted  by  the  Government  to  further  enhance  job creation,  particularly  in  sectors  beyond  technology  and  ensure  sustainable growth within these startups and if so, the details thereof;
- (c) the exemptions for new Startups in income tax and GSTIN; and
- (d) if so, the details thereof?

## ANSWER

## वाणिज्य एवं उद्योग मंत्रालय में राज्य मंत्री ( श्री णिणिन प्रसाद ) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI JITIN PRASADA)

- (a): The Government with an intent to build a strong ecosystem of the country for nurturing  innovation,  startups  and  encouraging  investments  in  the  startup ecosystem of the country launched the Startup India initiative on 16th January 2016.

The programs under the initiative are implemented on a Pan-India basis with certain specific outreach and awareness measures for tier 2 and tier 3 cities. Such measures inter-alia include capacity building and handholding, ecosystem development and international exposure programs. The details of such measures are placed as Annexure-I.

Further,  the  Government  is  implementing  Startup  India  Seed  Fund  Scheme (SISFS) and Credit Guarantee Scheme for Startups (CGSS) under the Startup India initiative to support startups at various stages of their business cycle.

SISFS provides financial assistance to seed stage startups through incubators. The  Experts  Advisory  Committee  (EAC)  of  SISFS,  evaluates  and  selects incubators for allocation of funds. The approved incubators select startups in accordance with the guidelines. Funds under this Scheme are released to the incubators  in  milestone-based  installments.  For  the  purpose  of  seeking milestone-based installments,  incubators  submit detailed  report  on  status  of utilization of funds and audited expenditure. The EAC monitors the performance of the incubators and funding to startups from time to time.

Under the Scheme, 213 incubators have been approved by the EAC and the approved incubators have selected 2,490 startups for financial support as on 31 st  October 2024.

CGSS is implemented for  enabling  collateral  free  loans  to  startups  through eligible financial institutions [Member Institutes (MIs)]. CGSS is operationalized by the National Credit Guarantee Trustee Company (NCGTC) Limited and has been operationalized from 1st April 2023.

The MIs evaluate credit applications by using prudent banking judgement and due  diligence  in  selecting  commercially  viable  proposals  and  conduct  the account of the borrowers with banking prudence. The MIs are governed by the financial  institutions  norms,  monitoring  and  procedures  as  laid  down  by  the Reserve Bank of India [in case of banks, Non-Banking Financial Companies (NBFCs) and Financial Institutions] and  Securities  Exchange  Board  of  India (SEBI) [in case of Alternative Investment Funds].

Under this Scheme, 28 MIs have been on-boarded and the MIs have extended credit support to 191 borrower startups as on 31 st  October 2024.

The details of eligibility criteria and process of application for each of the abovementioned  Schemes  are  provided  in  their  respective  operational  guidelines placed as Annexure-II .

The selected incubators under the SISFS and the network of Member Institutes under the CGSS are spread across the country enabling effective reach of the Schemes across tier 2 and 3 cities as well.

- (b): Under  the  Startup  India  initiative,  the  Government  constantly  undertakes various efforts for the development and growth of startup ecosystem and to enhance job creation in the country.

The flagship Schemes namely, Fund of Funds for Startups (FFS), Startup India Seed  Fund  Scheme  (SISFS)  and  Credit  Guarantee  Scheme  for  Startups (CGSS)  support  startups  at  various  stages  of  their  business  cycle.  The Government  also  implements  periodic  exercises  and  programs  including States' Startup Ranking, National Startup Awards, and Innovation Week which play an important role in the holistic development of the startup ecosystem. Initiatives  to  improve  market access and enable public procurement support startups in growing and scaling up their businesses. Digital platforms such as the Startup India Hub portal and Bharat Startup Knowledge Access Registry (BHASKAR)  enable  easy  access  to resources and startup  ecosystem collaboration. These measures are complemented by regulatory reforms and other ecosystem development events and programs.

As a result, entities recognised as startups by the Department for Promotion of Industry and Internal Trade (DPIIT) as per eligibility conditions prescribed under G.S.R. notification 127 (E) dated 19th February 2019 have reportedly created over 16.6 lakh direct jobs across more than 55 varied industries which include areas beyond technology as well. The industry-wise list of direct jobs created by recognized startups (self-reported) is placed as Annexure-III .

- (c) & (d): Several initiatives, policy measures, and reforms have been undertaken by the Government  for  startups  and  small  businesses  to  avail  various  tax  related benefits. These include profit linked deductions under Section 80-IAC of the Income Tax Act 1961, deferring Tax Deducted at Source (TDS) in respect of income pertaining to Employee Stock Option Plan (ESOP), relaxation for carry forward and set-off of loss, and exemptions on Goods and Services Tax (GST) for services provided by incubatee entrepreneurs among others. The detailed list of such measures is placed as Annexure-IV .

********

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (a)  OF  THE  LOK  SABHA UNSTARRED QUESTION 2321 FOR ANSWER ON 10.12.2024.

The details of various measures being undertaken to ensure that the benefits of the Startup India initiative are effectively reaching startups across the country:

## 1. Capacity Building and Handholding

Capacity  building  workshops  are  undertaken  throughout  the  year  across regions including  non-metro  cities under  the States'  Startup  Ranking ('SRF') exercise  to  promote  and  handhold  States  and  UTs  in  developing regional  ecosystems.  Monitoring,  capacity  development,  and  handholding sessions are also conducted specifically for incubators beyond metro cities and regions.

## 2. Outreach and Awareness

Outreach  and  awareness  activities  for  startups  are  organized  across  the country including in areas beyond metropolitan cities. These activities include encouraging entrepreneurs from non-metropolitan cities and enabling opportunities  for  funding,  incubation,  mentorship  and  business  linkages  in collaboration with State/UT administrations .  Various startup showcases are also organised where startups pitch their business proposals to investors and participate in capacity building activities. The programs implemented under the Startup India initiative are also propagated through various social media platforms .

## 3. Ecosystem Development Events and Programs

Various national ecosystem development events and programs are held such as the Startup Mahakumbh, which fosters innovation and entrepreneurship by bringing the ecosystem together from various parts of the country; ASCEND (Accelerating Startup Caliber & Entrepreneurial Drive) sensitization workshops  on  startups  and  entrepreneurship  are  conducted  across North Eastern States to support upcoming entrepreneurs from the region; and the Startup India Innovation week is held around the National Startup Day i.e., 16th January, to celebrate entrepreneurship and promote innovation with stakeholders from across India.

## 4. International Exposure and Linkages

The  Startup20  Engagement  Group  was  institutionalised  under  India's  G20 Presidency  to  facilitate  harmonisation  and  cross  collaboration  amongst  the largest  global  economies.  The meetings  and  engagements  of  Startup20 Engagement  Group under  India's  G20  Presidency  were  held  across  the country providing access to global market, visibility and resources of India's regionals  startup  ecosystems.  International  linkages  are  further  developed through international Government to Government partnerships, participation in international forums, hosting of global events, and international bridges with different countries that aid in promoting cross collaboration.

## 5. Encouraging Ecosystem Collaboration

The Government launched the Startup India Hub portal for stakeholders of the entrepreneurial ecosystem in India to discover resources, information, and various benefits under the Startup India initiative on a common digital platform. This portal enables various programs and initiatives to be accessed digitally, improving  accessibility  for  entrepreneurs  and  startups  even  from  non-metro cities and regions. Further, the Government has launched the Bharat Startup Knowledge Access Registry (BHASKAR) which  is  a  platform  designed  to centralize,  streamline,  and  enhance  collaboration  among  key  stakeholders within the entrepreneurial ecosystem, which is enabling startups and entrepreneurs from non-metro cities and regions to connect with the larger startup ecosystem .

********

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (a)  OF  THE  LOK  SABHA UNSTARRED QUESTION 2321 FOR ANSWER ON 10.12.2024.

The details of the flagship Schemes implemented under Startup India initiative along with operational guidelines are as follows:

1. Startup  India  Seed  Fund  Scheme  (SISFS): The  Startup  India  Seed  Fund Scheme has been approved for the period of 4 years starting from 2021-22 with a corpus of Rs. 945 crore. The Scheme aims to provide financial assistance to startups  for  proof  of  concept,  prototype  development,  product  trials,  market entry and commercialization. The Scheme is implemented from 1st April 2021. The Experts Advisory Committee (EAC), under SISFS, is responsible for the overall  execution  and monitoring of SISFS. The EAC evaluates and selects incubators for allocation of funds under the Scheme. As per provisions of the Scheme,  the  selected  incubators  shortlist  startups  based  on  parameters outlined in Scheme guidelines. The operational guidelines of the Scheme is accessible at:

https://dpiit.gov.in/sites/default/files/Guidelines-FundScheme-Startup-29January2021.pdf

2. Credit  Guarantee  Scheme  for  Startups  (CGSS): The  Government  has established  the  Credit  Guarantee  Scheme  for  Startups  for  providing  credit guarantees  to  loans  extended  to  DPIIT  recognized  startups  by  Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt  Funds  (VDFs)  under  SEBI  registered  Alternative  Investment  Funds. CGSS is aimed at providing credit guarantee up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers viz. DPIIT  recognised  startups.  CGSS  is  operationalized  by  the  National  Credit Guarantee Trustee Company Limited (NCGTC). The operational guidelines for CGSS is accessible at:

https://www.ncgtc.in/en/product-details/CGSS/Credit-Guarantee-Scheme-for-Start-ups-(CGSS)

## ANNEXURE-III

## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (b)  OF  THE  LOK  SABHA UNSTARRED QUESTION 2321 FOR ANSWER ON 10.12.2024.

Industry-wise details of direct jobs created by entities recognised as startups by DPIIT as of 31 st  October 2024 (self-reported):

|   S.No. | Industry                            | Number of direct jobs   |
|---------|-------------------------------------|-------------------------|
|       1 | Advertising                         | 11,839                  |
|       2 | Aeronautics Aerospace & Defence     | 12,801                  |
|       3 | Agriculture                         | 83,307                  |
|       4 | Artificial Intelligence (AI)        | 23,918                  |
|       5 | Airport Operations                  | 1,205                   |
|       6 | Analytics                           | 9,450                   |
|       7 | Animation                           | 2,104                   |
|       8 | AR VR (Augmented + Virtual Reality) | 5,848                   |
|       9 | Architecture Interior Design        | 10,326                  |
|      10 | Art & Photography                   | 4,441                   |
|      11 | Automotive                          | 39,535                  |
|      12 | Biotechnology                       | 3,557                   |
|      13 | Chemicals                           | 16,675                  |
|      14 | Computer Vision                     | 2,484                   |
|      15 | Construction                        | 88,702                  |
|      16 | Dating Matrimonial                  | 717                     |
|      17 | Design                              | 9,039                   |
|      18 | Education                           | 90,414                  |
|      19 | Enterprise Software                 | 24,899                  |
|      20 | Events                              | 5,503                   |
|      21 | Fashion                             | 24,253                  |
|      22 | Finance Technology                  | 56,819                  |
|      23 | Food & Beverages                    | 88,468                  |
|      24 | Green Technology                    | 27,808                  |
|      25 | Healthcare & Lifesciences           | 1,47,639                |
|      26 | House-Hold Services                 | 17,530                  |
|      27 | Human Resources                     | 87,983                  |
|      28 | Indic Language Startups             | 3,453                   |
|      29 | Internet of Things                  | 14,885                  |
|      30 | IT Services                         | 2,04,119                |
|      31 | Logistics                           | 11,608                  |
|      32 | Marketing                           | 29,685                  |
|      33 | Media & Entertainment               | 20,515                  |
|      34 | Nanotechnology                      | 1,850                   |
|      35 | Non- Renewable Energy               | 12,856                  |
|      36 | Other Specialty Retailers           | 14,179                  |
|      37 | Others                              | 28,278                  |
|      38 | Passenger Experience                | 252                     |
|      39 | Pets & Animals                      | 3,054                   |
|      40 | Professional & Commercial Services  | 94,060                  |

| S.No.   | Industry                       | Number of direct jobs   |
|---------|--------------------------------|-------------------------|
| 41.     | Real Estate                    | 15,873                  |
| 42.     | Renewable Energy               | 41,523                  |
| 43.     | Retail                         | 33,114                  |
| 44.     | Robotics                       | 5,956                   |
| 45.     | Safety                         | 9,245                   |
| 46.     | Security Solutions             | 27,907                  |
| 47.     | Social Impact                  | 7,973                   |
| 48.     | Social Network                 | 5,136                   |
| 49.     | Sports                         | 6,500                   |
| 50.     | Technology Hardware            | 50,894                  |
| 51.     | Telecommunication & Networking | 16,524                  |
| 52.     | Textiles & Apparel             | 38,867                  |
| 53.     | Toys and Games                 | 4,802                   |
| 54.     | Transportation & Storage       | 30,509                  |
| 55.     | Travel & Tourism               | 23,828                  |
| 56.     | Waste Management               | 12,810                  |
| Total   |                                | 16,67,519               |

********

## ANNEXURE REFERRED TO IN REPLY TO PARTS (c) & (d) OF THE LOK SABHA UNSTARRED QUESTION 2321 FOR ANSWER ON 10.12.2024.

## Details of various tax exemptions provided to startups under the Income Tax Act, 1961 (the Act)

## 1. 100% deductions to the profit of the startup under section 80-IAC

100% profit linked deduction to an eligible startup, incorporated on or after the 1 st  day of April, 2016 but before the 1 st  day of April, 2025, for a period of three consecutive  assessment  years  out  of  ten  years  beginning  from  the  year  in which it is incorporated, if the total turnover of its business does not exceed one hundred crore rupees in the previous year relevant to the assessment year for which the deduction is claimed.

## 2. Employee Stock Option Plan (ESOP)

In  order  to  ease  the  burden  of  payment  of  taxes  by  the  employees  and  to incentivize  the  eligible  startups  to  skilled  employees,  Finance  Act,  2020 amended section 192 of the Act deferring TDS deduction in respect of income pertaining to ESOPs. It has been provided that in case of an employee of an eligible startup, as referred to in section 80-IAC of the Income-tax Act, 1961 (the Act) being perquisite of the nature of ESOPs in any previous year relevant to the assessment year 2021-22 or subsequent year, deduction/payment of tax on such income may be made within fourteen days-

- i. after  the  expiry  of  forty-eight  months  from  the  end  of  the  relevant assessment year; or
- ii. from the date of the sale of such specified security or sweat equity share by the assessee; or
- iii. from the date of which the assessee ceases to be the employee of the person;

whichever is the earliest, on the basis of rates in force of the financial year in which the said specified security or sweat equity share is allotted or transferred

## 3. Relaxation for carry forward & set-off of loss by startup:

Section 79 of the Income-tax Act, 1961 contains certain restrictions for carry forward  and  set-off  of  losses  in  case  of  certain  companies  where  there  is change of majority shareholding. In order to facilitate the new investment in the startup, Vide Finance (No.2) Act, 2019 the provisions of section 79 have been amended so as to allow an option to an eligible startup, as referred to in section 80-IAC of the Act, to carry forward and set-off of losses even in the case of change in majority shareholding if the original shareholders continue to hold their shares.

## The following exemptions/relaxations are provided for startups and other small businesses for Goods and Services Tax (GST)

Goods and Services Tax (GST) rates and exemptions on services are prescribed on the recommendations of the GST Council which is a Constitutional body comprising of  representatives  from  the  Centre  and  the  State/UT  Governments.  On  the recommendations made by the GST Council, the following exemptions are provided for startups:

1. Services provided by an incubatee up to a total turnover of Rs. 50 lakh in a financial year subject to the following conditions, namely:-
- i. the total turnover had not exceeded Rs. 50 lakh during the preceding financial year; and
- ii. a period of three years has not elapsed from the date of entering into an agreement as an incubatee.
2. Taxable  services  provided  or  to  be  provided ,  by  a  Technology  Business Incubator or a Science and Technology Entrepreneurship Park recognised by the National Science and Technology Entrepreneurship Development Board of the Department of Science and Technology, Government of India or bio-incubators recognised by the Biotechnology Industry Research Assistance Council, under the Department of Biotechnology, Government of India.

For the purposes of GST, 'incubatee' means an entrepreneur located within the premises  of  a  Technology  Business  Incubator  or  Science  and  Technology Entrepreneurship  Park  recognised  by  the  National  Science  and  Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India and who has entered into an agreement with  the  Technology  Business  Incubator  or  the  Science  and  Technology Entrepreneurship  Park  to  enable  himself  to  develop  and  produce  hi-tech  and innovative products.

3.  Small and medium enterprises are not required to obtain GST registration, if their aggregate turnover in a financial year does not exceed:
- i. Rs. 40 lakh (Rs. 20 lakh for special category States) for Intra-State taxable supply of goods.
- ii. Rs. 20 lakh (Rs. 10 lakh for special category States) for Intra-State taxable supply of Services.
4.  Composition levy scheme in GST for Registered Small and Medium Enterprises, tax has to be paid on Quarterly based on a declaration and have to file only one annual return. Scheme may be opted if:
- i. supplier  of  goods  whose  aggregate  turnover  does  not  exceed  Rs.  1.50 crore, (Rs. 75 lakh for Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand) in the preceding financial year.
- ii. A supplier of services with annual turnover up to Rs. 50 lakh.
5.  Special  return  filing  provisions:  All  eligible  registered  suppliers  of  goods  or services having annual turnover up to Rs. 5 crore in the preceding financial year may opt for filing of quarterly return with monthly payment of tax.
6.  Electronic invoicing (e-invoice) for Business to Business (B2B) invoices has been introduced  in  a  phased  manner.  It  was  made  mandatory  for  businesses  with turnover  exceeding  Rs.  500  Crores  with  effect  from  1st  October,  2020.  This threshold  of  turnover  has  subsequently  been  revised  to  Rs.  100  Crores  w.e.f. 01.01.2021, to Rs. 50 crore w.e.f. 01.04.2021, to Rs. 20 crore from 01.04.2022, to Rs. 10 crore from 01.10.2022 and to Rs. 5 crore from 01.08.2023. E-invoice helps  in  seamless  flow  of  credit  &  invoice  matching  as  envisaged  in  the  GST regime, besides also easing the process of filing returns.
7.  Retrospective  amendment  with  effect  from  01.07.2017  made  in  section  50  to provide that interest is required to be paid on the wrongly availed Input Tax Credit (ITC) only when the same has been availed as well as utilized. Rate of interest on wrongly  availed  and  utilized  ITC  reduced  to  18%  from  24%  with  retrospective effect from 01.07.2017.
8.  Suspension of GST registration will be automatically revoked without requiring taxpayer to make any application with the tax officer, once all the pending returns are filed on the portal.  Time  limit for  applying  for  revocation  of  cancelled  GST registration extended from 30 to 90 days.
9.  Unified  Payments  Interface  (UPI)  and  Immediate  Payment  Service  (IMPS)  to facilitate registered suppliers of goods or services and to further encourage digital payment.
10.  Exemption  from  filing  annual  return  in  FORM  GSTR-9/9A  for  FY  2023-24  to registered suppliers of goods or services having Annual Aggregate Turnover upto Rs. 2 crore. All registered suppliers of goods or services with annual aggregate turnover  upto  Rs.  5  crore  are  not  required  to  file  Reconciliation  Statement  in FORM GSTR 9C along with annual return.

*******