1. Compliance under Labour Law

Labour laws in general deal with compliances under the Minimum Wages Act, Workmen’s Compensation Act, Industrial Dispute Acts, etc.

The most important among these acts in compliance with provisions of Sexual Harassment of Women at Workplace Act which is often overlooked by the startups and later have to face a penalty for the same. Every employer by an order in writing has to form an Internal Complaints  Committee under Section 4 of the act where women can register their Complaints regarding Sexual harassment.

In case of non-compliance with the provisions of the act, a fine up to 50 thousand rupees shall be imposed if the offense is repeated more than once punishment imposed can be twice of that imposed at the first instance. Non-compliance can also lead to cancellation of the employer’s license or withdrawal, non-renewal or cancellation of registration required for business by government or any other local authority.

2. Compliance under Environmental Law

Increasing environmental awareness has made the laws related to the environment more stringent and non-compliance with them leads to higher penalties.

Post the enactment of the National Green Tribunal Act, 2010, which incorporates all other environmental laws under its umbrella, the penalties for non-compliance with such laws have increased manifold.

Section 26 (1) of NGT Act, 2010 states that the tribunal can award a fine up-to 10 crores and imprisonment of 3 years or both for the non-compliance of an order, award, or decision by NGT. In case of a continuing offence, the fine can be escalated up-to 25,000 Rupees per day until such continuance.

In Sterlite Industries (I) Ltd. Vs. Union of India and Ors., Supreme Court imposed the penalty of Rs.100 Crores on Sterlite Industries for contravening the provisions of the Air Act and causing pollution beyond the permissible limits. Sterlite Industries had set up and was operating Copper Smelter Plant in Tamilnadu.

3. Compliance under Companies Act, 2013

A startup that is incorporated as a company under the Companies Act, 2013, must conform with its provisions. The Companies Act, 2013 regulates the appointment of directors, the manner in which the annual general meeting and the board meeting is to be conducted, appointment of auditors, other basic requirements like having PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number), bank account, etc.  after the incorporation.  The businesses are expected to comply with the rules and regulations applicable to them to avoid the penalty that may be incurred in case of non-compliance.

4. Compliance under Income Tax Act, 1961

Every business is liable for filing of income tax returns and other procedural liabilities under the act. The Income Tax Act specifies a time limit for such filing and in case of any discrepancy, for an appeal to the higher authorities. It is essential that business, small or big, take such rules seriously and comply with them accordingly.

5. GST Compliance

Businesses or startups having less than Rs.40 lakhs per annum turn over are exempted from being considered for GST registration. This provision will help small businesses rise at a faster pace without being liable to GST in the initial days of their growth.  The amalgamation of multiple taxes under GST has facilitated the expansion of profits, specifically for startups.

The benefits, however, do not release startups completely from their liability to comply with the provisions of GST. As the startup grows over time, it needs to comply with the rules under GST.

There are other laws in India which one needs to comply with to run a successful startup. It is difficult for a business entity to keep a check on all the compliances it needs to fulfill along with its profit-making goal.