Turning the page on red tape, start-ups to go paperless

Single-window clearance, changes in tax rules, easy entry and winding-down rules, and a government fund for small and medium enterprises (SMEs) could all be part of a new policy to encourage start-ups.

Prime Minister Narendra Modi’s proposed Start-up India, Stand-up India plan, to be made public on January 16, is expected to have regulations enabling start-ups to get going with a minimum of paperwork, sources said.

Modi had announced the campaign in his August 15 address. On Sunday, in his periodic Mann Ki Baat radio show, he’d said the policy would be designed to suit Indian conditions. And, that the focus would be on ensuring benefits to youth from the lowest strata.

The policy is being given final touches, after much discussion between various departments and the NITI Aayog. And, with a number of individuals, including Paytm founder Vijay Shekhar Sharma, Snapdeal chief executive Kunal Bahl and Infosys co-founder Mohandas Pai. Sources say there would be provisions for enabling registering of a company within hours. Also, the ministries which handle manufacturing, software development and biotechnology would all have an online single-window clearance system for files related to start-ups.

“Every ministry would be given a set duration of time for clearing start-up files. The company would have to upload files on the website and within a few hours, would be given clearance to set it up,” said an official at NITI Aayog. A company could perhaps be set up in four hours, he said. At present, setting up an e-commerce company takes a minimum of at least 10 days. Also, sources said, the new policy would simplify rules around the Income Tax (I-T) Act. “At present, by Section 72 of the I-T Act, business loss can be carried forward and set-off for a period of eight years, with certain restrictions prescribed in Section 79.

Given the capital-intensive nature of the industry and huge gestation period typically experienced by technology start-ups, the time-limit might not be sufficient for absorption of losses,” said a senior executive of an e-commerce firm. He said he believed the time limit for carry-forward and set-off of business loss would be extended to 12 years. And, “the rigours of Section 79 would be restricted to cases where a change in shareholding is effected with a view to avoid or reduce tax liability by way of a restructuring exercise,” he added. The finance ministry is looking at fund allocation for SMEs, small e-commerce firms and manufacturing units.