The Labour Ministry has directed retirement fund body Employees’ Provident Fund Organisatio (EPFO) and health insurance provider Employee’s State Insurance Corporation (ESIC) to exempt startups from inspection and filing returns for three years.
In line with Prime Minister Narendra Modi’s vision to nurture startups, the ministry said in a set of directions last week that the new age ventures should be allowed to self-certify their compliance with nine labour laws.
Labour Secretary Shankar Aggarwal in a letter has said that startups should not be inspected or asked to file returns for three years under nine laws including Employees’ Provident Fund and Miscellaneous Provisions Act and the Employees State Insurance Act.
“Promoting startups would need special hand holding and nurturing. Thus, such ventures may be allowed to self-certify compliance with the Labour Laws,” he added.
They will be exempted from inspection under the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, Payment of Gratuity Act and Contract Labour Act.
Startups will also be exempted from filing returns under the Industrial Disputes Act, Building and other Construction Workers Act, Inter-State Migrant Workmen Act, Contract Labour Act, EPF Act and ESI Act.
There will be a blanket exemption from inspection and filing returns for the first year and would be asked to file an online self declaration form.
They will also not be asked to file return or inspected for the next two years, but will be inspected in case a “very credible and verifiable” complaint of violation is filed in writing and the approval has been obtained from the Central Analysis and Intelligence Unit (CAIU), Aggarwal said.
Except the EPF and Miscellaneous Provisions Act and the ESI Act, the implementation of other seven laws lies in both central and state government’s sphere. Labour Ministry had directed its officials as well as the EPFO and ESIC to regulate inspection of startups, under laws which lie in the Centre’s sphere.
Start-ups account for 60% of PE deals in 2015
Private equity deal tally surged 30 per cent to $16 billion through 1,000 deals in 2015, largely driven by the startup segment, which contributed 60 per cent of the total investment volume, says a report. In 2014, there were 608 private equity transactions worth $12.37 billion. According to assurance, tax and advisory firm Grant Thornton, 2015 witnessed PE activity at an all-time peak contributing more than 60 per cent of overall deal volume during the year and 34 per cent of overall deal values.
“With inflation in control and GDP growth being revised to now higher than anticipated, all necessary ingredients seem to be in place for growth in deal activity as well. The recent FDI norms and the much awaited GST will perhaps be a game changer and will further accelerate the deal activity from an inbound investment, domestic M&A and PE perspective,” Grant Thornton India Partner Prashant Mehra said.
The substantial increase in volume was largely due to an impressive level of interest among private equity and venture capita investors in India’s startups, the report pointed out.