Beyond the #Startup hype: Tax experts point out the need for clarity in several areas

#Mumbai: #Bengaluru  As the dust settles down on the government’s big-bang jamboree earlier this month to woo the start-up community through the ‘Startup India’ Action Plan (SAP), tax experts, investors and start-up founders feel the success of the initiative would depend largely on changes in several existing laws, resolution of tax-related issues, and the ability of the states to make compliance easy and simple. To a great extent, Budget 2016 may hold some answers to the concerns of the start-up community.

To start with, experts point out that though the definition of ‘start-up’ in the SAP document is wide, the procedure for qualification may involve substantial red-tape. When it comes to registration of a business, the multiple trips to the registrar of companies, timelines for name acceptance, and the incorporation process could be crunched by condensing forms and through use of pre-accepted charter documents. “This affords legal protection for founders to hit the road running, rather than engage lawyers or accountants to work with drafting of charter documents,” says Aarthi Sivanandh, partner in law firm, J Sagar Associates.

Interestingly, the SAP document does not say much about the role of the states in making compliance simpler. “Most of the licences and approvals required to actually commence business operations are regulated by the state. It would go a long way if states were to shift many of these applications online, and instead of approvals make the licence available on a self-certification basis,” notes Ajay Joseph, partner, Lakshmikumaran & Sridharan.

Adds Preeti Balwani, partner, Rajani Associates: “The success of the self-certification model for labour, environmental clearances, and other compliances would depend largely on the attitude of the states.” Compliances for labour, fire safety and other clearances vary from state to state. “Companies looking to expand their operations from one state to another may need to consider whether such situations warrant multiple compliances in various states,” she says.

Start-up founders and legal experts feel that a host of laws needs to be changed to facilitate the ease of doing business. According to Sanjay Khan of iSpirt, a think-tank promoting the cause of the software product sector, the key laws that need to be amended include the regulations made under the Foreign Exchange Management Act, 1999, by the Reserve Bank of India, Income-tax Act, 1961, and allied laws by the Central Board of Direct Taxes, and the Companies Act, 2013, along with related laws by the Ministry of Corporate Affairs (MCA). by Agencies.