Entity up to 10 years of existence, turnover up to ₹100 crore can be called a ‘start-up’
The Finance Ministry has incorporated a new definition of ‘start-up’ in the procurement process for consultancy and other services by the government. This will help a large number of start-ups to get new business opportunities.
Conditions for ‘start-up’
DPIIT, through a gazette notification dated February 19, 2019, had amended the definition of ‘start-up’.
The first condition said that an entity will be considered as a ‘start-up’ up to a period of 10 years from the date of incorporation/registration. It can be a private limited company, a partnership firm or a limited liability partnership.
The second condition is that the turnover of the entity for any of the financial years since incorporation/ registration should not exceed ₹100 crore.
The third condition prescribed that the entity is “working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation”.
It was clarified that an entity formed by splitting up or reconstruction of an existing business will not be considered as a ‘start-up’.
In its OM, the Expenditure Department said that the condition of prior turnover and prior experience may be relaxed for ‘start-up’ (as defined by DPIIT) – subject to meeting of the quality and the technical specifications. The quality and technical parameters are not diluted.
For this purpose, an entity will be recognised as ‘start-up’ for up to 10 years of existence and up to ₹100 crore of turnover. Earlier, the existence period was 5 years and turnover limit was ₹25 crore.
Likewise, the manual has also replaced one parameter for defining a ‘start-up’, which used to say that it is “working towards innovation, deployment of commercialisation of new products, processes or services driven by technology or intellectual property”.
Earlier, the entity desired to take benefit of a start-up based on definition at that time (5 years of existence and up to ₹25 crore of turnover) was required to obtain ‘a certificate of an eligible business from the Inter-Ministerial Board of Certification’.
Now, recognition as start-up by DPIIT will make them eligible to bid. As on date, there are over 50,000 start-up recognised by DPIIT.