Indian Government Officials Optimistic: G20 Nations Expected to Reach Consensus on Common Startup Definition by July, Addressing Valuation and Taxation Challenges
- ByStartupStory | April 17, 2023
Officials have announced that the G20 nations are currently working on establishing a common definition for startups based on criteria such as size, revenue, and innovation. The goal is to bring consistency to the valuation and taxation of startups across the G20 countries. The Startup20 Engagement Group of the G20 has already commenced work on this definition, and a preliminary draft is expected to be released to the public by May 15, with the aim of finalizing the definition by early July.
An anonymous official stated that the G20’s objective is to establish a definition of startups. The absence of a uniform definition has resulted in varying international valuations and tax rates, posing a significant challenge.
According to the official, the G20 countries are currently discussing and aiming to release a joint communique by the beginning of July summit. Meanwhile, the Department for Promotion of Industry and Internal Trade (DPIIT) defines a startup as an entity that has been incorporated for up to 10 years, with a turnover that does not exceed Rs 100 crore for any financial year since incorporation.
According to the official, different G20 members, including some from the European Union, have varying definitions for startups. For example, they define startups as entities less than ten years old, innovative in product and business models, and looking to scale up. However, South Korea considers all small and medium enterprises as startups. Therefore, the Startup Group is exploring whether there can be complete uniformity on startup issues or if some flexibilities need to be considered based on the jurisdiction’s viewpoint, said Chintan Vaishnav, Startup20 India. The group aims to reach a clear understanding and finalize a joint statement by the first week of July.
Chintan Vaishnav, the chair of Startup20 India, stated that there is a need for a clear understanding of how different jurisdictions define startups, and the Startup Group is exploring the possibility of achieving complete harmony across all issues or being flexible. As the G20 presidency, India has set up the first Startup20 engagement group, which is examining various components of startups, including size of business, revenue, and innovativeness. The group is expected to release the first draft of the startup definition for public consultation by May 15 and may also involve incubators to host townhall meetings with startups to discuss the draft. The outcome of the deliberations is crucial as India has witnessed a 40% increase in the number of DPIIT-registered startups in the past year, bringing the total to 95,000.
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