April 27, 2023

Benefits from Government of India for Gaming Startups

Globally, startups are driving the economic growth of nations, creating employment, and fostering a culture of innovation. The Indian startup ecosystem is no less and is only the third largest in the world after the United States & China. At present, there are ~90,000 start-ups in India and ~110 Unicorns which are worth ~30 billion USD. With emerging entrepreneurship in the Indian economy, it is pertinent that the Government of India (GOI) also focuses on nurturing this and thereby supports building a strong and inclusive ecosystem for innovation and entrepreneurship in India.

Being in the Gaming startup space, we have seen how this sector is at the cusp of growth and is on the trajectory to grow by 20-30% by FY23 and is expected to reach INR 380 Bn by 2026. The overwhelming support by GOI to start-ups in India is much needed for businesses to grow. In this article, we try to capture what is the series of incentives offered by the GOI, that a startup founder (especially in the gaming space) can explore for their business.

Gaming-specific initiatives: 

  • Hon’ble Finance Minister Nirmala Sitharaman introduced the ‘Animation Vision Gaming Comics (AVGC) taskforce’ (‘The Taskforce’)as a part of the broader Media & Entertainment sector in India during her budget speech of FY 2022-23. The main recommendations of the Task Force categorized broadly under 4 categories are as under:
    • Domestic Industry Development for Global Access which briefly includes – Launch of a ‘Create in India’ campaign with an exclusive focus on content creation, In India, For India & World. To make India the global hub for AVGC, it is also proposed to institute an International AVGC Platform, along with Gaming Expos) with a focus on FDI and innovation. Establishing a National Centre of Excellence (COE) for the AVGC sector to become an international reference point across Skilling, Education, Industry Development, and Research & Innovation for the AVGC sector.
    • Develop a Talent ecosystem to realize Demographic Dividends by upskilling in the AVGC space and to create awareness about AVGC as a career choice and further Launch AVGC-focused UG/ PG courses with a standard curriculum.
    • Enhancing Technology & Financial Viability for Indian AVGC Industry by providing enhanced Ease of Doing Business in the AVGC sector i.e tax benefits, import duties, curbing piracy, etc. Leverage Start-Up India to provide technical, financial, and market access assistance to AVGC entrepreneurs to promote the culture of R&D and local IP Creation.
    • Raising India’s soft power through Inclusive growth by Establishing a dedicated Production Fund for domestic content creation from across India to promote Indian culture & heritage globally, target skilling and industry outreach for youth in Tier 2 & 3 towns and villages in India. Establishing Special incentives for women entrepreneurs in the AVGC sector etc.
    • Additionally, Indian Government has set up the AVGC Centre of Excellence in collaboration with IIT Bombay in 2022. Further, Karnataka and Telangana have dedicated state-level AVGC policies which one could explore and check on the benefits. At present, the policies provide a host of benefits from providing post-production labs/incubators, upskilling, production grants and subsidies, etc.

Since the initiatives, the AVGC space is evolving as there are numerous proposals put forth by the governments, a gaming founder can keep a close watch on these initiatives and take the most benefit from them.

  •  DPIIT Recognition and Benefits
    • The government offers the facility for any start–up to apply to the Department for Promotion of Industry and Internal Trade (DPIIT) for its recognition and benefits. To apply for registration, the same can be done online on the Start-up India website. At present close to 70,000 startups have been recognized by DPIIT in India.
    • Benefits of DPIIT Recognition include-
      • Intellectual Property Rights: To protect the idea of start-up businesses or any other intangible form of assets, a DPIIT-recognized start-up can avail of this benefit. The government eases protecting and commercializing IPRs. Under this provision, the start-up bears only the statutory fee which leads to a reduction of 80% of the cost.
      • Self-Certification under Labour and Environment Laws: Start-ups are permitted to self-certify themselves about complying with 9 Labour and 3 Environment laws for 3 – 5 years from the date of incorporation.
      • Angel taxation: The Income Tax Act provides that if the shares of a closely held company are issued at a price higher than the fair market value, the difference between the two prices is taxable in the hands of the issuer company as income. However, such taxability is relaxed for startups who are registered with DPIIT.
      • Profit-linked incentive: Any DPIIT-recognized start-up which is also granted the Inter-Ministerial Board Certificate is eligible for exemption from income tax for 3 consecutive years out of 10 years since incorporation. Also, the business must have a turnover of less than INR 25 Cr in the year in which the deduction is claimed, in addition to other conditions provided in the provisions.
      • Faster exit: The Ministry of Corporate Affairs (MCA) has notified startups as ‘Fast Track Firms.’ Once they file for wind – up such process is completed within 90 days (about 3 months). For other companies, the time limit for winding up is 180 days (about 6 months).
      • Relaxed norms for public procurement:Start-ups shall be exempt from the criteria of “prior experience/ turnover” without any relaxation in quality standards or technical parameters.
      • The National Single Window System (NSWS) is another program launched by DPIIT and InvestIndia. It is a digital platform to guide start-up founders to identify and apply for approvals to launch their businesses.

To ensure an integrated growth of AVGC in India, the government has been doing an incredible job by introducing many schemes centrally and through states. The specific Task Force has given various actionable recommendations for key enablers of the sector, such as market access and development, skilling and mentorships, education, increasing access to technology, and creation of financial viability amongst others to aid the growth of the M&E industry in general, and AVGC sector, in the country. While this is not an exhaustive list, a gaming founder may refer to this as a good starting point along with the pages of Startup India and Invest India websites, to get a good idea of schemes that apply to them.

In this part of the article, we have attempted to capture the wide range of benefits offered to entrepreneurs, especially in the gaming space and from the DPIIT point of view. In the upcoming articles, we speak about the funding and other generic initiatives extended by the Government to the startup. Do wait and watch for more on this space in part II of this article to be published soon.

 

Poornima Nayak

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