Reimbursement of VAT/CST/GST on Goods Supplied to Incubatees: Karnataka Startup Policy

• Karnataka-based incubatees seeking GST reimbursement on goods supplied.

About this scheme

The Karnataka Startup Policy offers a crucial financial incentive in the form of VAT/CST/GST reimbursement for startups, designed to alleviate the financial strain on early-stage companies. This program is administered by Karnataka Biotechnology and Information Technology Services (KBITS), a key nodal agency of the Government of Karnataka. KBITS plays a pivotal role in fostering a dynamic ecosystem for innovation by promoting the growth and development of the Information Technology and Biotechnology sectors throughout the state. Through various policies and initiatives, KBITS actively supports innovative enterprises, recognizing their potential to drive economic growth and job creation. This specific reimbursement policy is a strategic tool to reduce the operational burden on emerging companies by directly offsetting a portion of their essential tax liabilities, thereby freeing up valuable capital for growth and innovation.

The incentive provides for the reimbursement of Value Added Tax (VAT), Central Sales Tax (CST), and Goods and Services Tax (GST) paid on goods supplied to eligible entities within Karnataka. This policy covers two distinct tax periods: the pre-GST era, specifically addressing VAT/CST, and the post-GST period, applicable from July 1, 2017, onwards. Startups can claim the net VAT/CST paid in Karnataka for goods procured, provided their annual turnover does not exceed Rs. 50 Lakhs. Similarly, for the post-GST regime, the program covers GST paid in Karnataka by eligible startups on purchases, also subject to the Rs. 50 Lakhs annual turnover cap. This dual-period coverage ensures continuity of support through different tax frameworks.

Funding is disbursed annually, providing consistent financial relief, and is available for the first three years of a startup's physical incubation period. This three-year window supports startups during their most vulnerable growth stages. The reimbursements for VAT incentives are specifically for sales meant for final consumers within Karnataka. For GST, it applies to purchases of goods made after the startup's official registration with the Karnataka Startup Cell. The primary objective of this financial assistance is to directly alleviate the tax burden associated with procuring necessary goods for startup operations, thereby improving cash flow and enhancing the sustainability of young enterprises. The program focuses purely on financial reimbursement; no non-monetary support is detailed within the scope of this specific policy.

Who can apply

• The startup must be officially registered with the Karnataka Startup Cell and possess a valid KBITS registration number, ensuring formal recognition within the state's startup ecosystem.
• It must be physically incubated within a GoK-supported incubator. This emphasizes a structured environment that provides mentorship, infrastructure, and networking crucial for startup growth.
• Reimbursement applies exclusively to purchases and supplies made subsequent to the startup's registration date with the Karnataka Startup Cell, ensuring the incentive is for operational activities during state recognition.
• The startup's annual turnover is capped at Rs. 50 Lakhs for eligibility. This threshold targets nascent and early-growth stage startups that typically face significant financial constraints.
• Eligibility extends only to the first three years of the startup's incubation, providing critical support during the challenging initial phase of market entry and growth.
• Reimbursement is released on a seniority basis, contingent upon budget allotment, ensuring transparency and fairness in the distribution of funds.

Benefits & funding

• Financial reimbursement of VAT/CST/GST on goods supplied in Karnataka.
• Funding disbursed annually for the first three years of physical incubation.
• Covers net VAT/CST (pre-GST) and GST (post-GST) paid for purchases.
• Aims to alleviate tax burden and improve cash flow.
• Purely financial support.

How the application process works

The journey below is informational, compiled from the official program guidelines. Applications are submitted directly with KBITS, Government of Karnataka, in your own name.

1. 1

   A Nodal Officer scrutinizes applications and documentation, including financial records.

2. 2

   The Karnataka Startup Cell assesses the eligible reimbursement amount.

3. 3

   The Managing Director, KBITS, sanctions the amount, making the final decision.

Documents checklist 13

• Application Forms (Annexure I, II, and III)
• KVAT, KST/CST, and Commercial Tax Department Registrations
• Year-wise and Monthly/Quarterly Net VAT/CST Paid Details
• Copy of VAT/CST Tax Returns (Form 100 and 240)
• Copy of Challan/Receipt from Commercial Tax Department
• Relevant VAT/CST Invoices Raised
• TIN Number of Supplier of Goods
• GST Registration and Commercial/Central Tax Department Registration
• Year-wise and Monthly/Quarterly Net GST Paid Details
• Copy of GST Tax Returns Filed
• GST Registration Number of Supplier
• Relevant GST Purchase Invoices
• Audited Financial Statements

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Frequently asked questions