Startup Definition Under Patents Amendment Rules, 2017
Key Concepts:
- Startup definition evolution (pre-2017 vs. post-2017)
- Turnover threshold
- Innovation, development, deployment, and commercialization
- Scalable business model
- Employment generation and wealth creation
- Startup India Initiative
- DIPP (Department of Industrial Policy and Promotion) notification
- Inter-Ministerial Board of Certification
Pre-2017 Startup Definition
Before the Patents Amendment Rules, 2017, a startup was defined based on three criteria:
- Date of Incorporation/Registration: The entity had to be within 5 years from the date of incorporation or registration.
- Turnover: The turnover in the said 5 years should not have exceeded ₹25 crores.
- Working of the Startup: The startup's activities had to pertain to innovation, development, deployment, or commercialization of new products, services, or processes, driven by technology or intellectual property.
The definition emphasized that the working had to be with regard to innovation, development, deployment or commercialization and it had to pertain to these three things either, it could be a product, a process or a service. And it should have been driven by technology or by intellectual property itself.
Negative Conditions:
- The entity could not be formed by splitting or reconstructing an existing business.
- Mere development of products/services with no commercialization potential or undifferentiated products/services with no or limited incremental value did not qualify.
Explanations:
- An entity ceased to be a startup if its turnover exceeded ₹25 crores within the 5-year period.
- The entity had to be a private limited company (Companies Act), a partnership (Partnership Act), or a Limited Liability Partnership (LLP Act, 2002).
- Turnover was defined as per the Companies Act.
- The working of the startup should aim towards developing and commercializing new products and or significantly improve existing product or process, and services, or create or add value, now to customers or workflow.
- RBI guidelines prevailed for foreign currency turnover calculations.
Post-2017 Startup Definition (Patents Amendment Rules, 2017)
The 2017 amendment simplified the definition:
- A startup means an entity in India recognized as a startup by the competent authority under the Startup India Initiative.
- For foreign entities, the criteria for turnover and period of incorporation/registration are as per the Startup India Initiative, with a declaration to that effect. Turnover is calculated as per RBI regulations.
This definition refers back the definition of a startup to the startup initiative.
DIPP Notification (April 11, 2018)
The Department of Industrial Policy and Promotion (DIPP) provided a more elaborate definition through a notification:
- Time Limit: An entity is considered a startup for up to 7 years from incorporation.
- Entity Type: The entity must be a private limited company (Companies Act), a partnership firm (Partnership Act), or an LLP (LLP Act).
- Biotechnology Sector Exception: Startups in the biotechnology sector have a period of 10 years.
- Turnover: The turnover must not exceed ₹25 crores within the 7-year (or 10-year for biotech) period.
- Working of the Entity: The entity's activities must involve innovation, development, or improvement of products and services. The focus on technology and intellectual property was removed.
- Scalable Business Model: The startup needs to have a scalable business model with high potential for employment generation or wealth creation.
Proviso: Splitting or reconstruction of existing businesses does not qualify for startup status.
Explanation:
- A startup ceases to be a startup when its turnover exceeds ₹25 crores within the specified timeframe (7 years or 10 years for biotech).
Other Definitions:
- Act is referred to as the Income Tax Act.
- Inter Ministerial Board of Certification is defined.
- Limited liability partnership is defined.
- Merchant banker is also defined.
- Partnership firm there are other definitions.
Recognition and Tax Provisions:
- The notification outlines the process for getting recognized as a startup.
- It also mentions tax provisions under the Income Tax Act.
- Provisions for revocation of startup status are included.
Startup India Website
The Startup India website provides details on the startup definition, statistics on recognized startups, funding and support information, and details on the Startup India hub, events, news, state ranking, and action plans.
Conclusion
The definition of a startup has evolved from specific criteria related to age, turnover, and activities to a more flexible definition tied to the Startup India Initiative. The DIPP notification provides detailed guidelines, including extended timelines for biotechnology startups and an emphasis on scalable business models with employment generation and wealth creation potential. The Startup India website serves as a central resource for information and support for startups.
AI summaries can miss context or contain errors. Check important details against the original video.
