Speedy approvals, new tax regime among govt’s business-friendly changes.
NEW DELHI: On 4 May, even as finance minister Arun Jaitley was away on a one-day trip to Frankfurt to attend the annual meeting of the Asian Development Bank, the Union cabinet passed the Insolvency and Bankruptcy Code.
The government did not want to take any chances. Only a few days were left in the second leg of the budget session of Parliament and the World Bank’s 31 May deadline for considering all reforms incorporated for its next ease of doing business rankings was drawing closer. The bill was subsequently passed in both houses of Parliament.
While it is not clear whether only passage of the bill will help India improve its abysmally low ranking in resolving insolvency-136 out of 189 countries—it reflects the Narendra Modi government’s all-out effort to provide a business-friendly environment in the country, especially under its Make In India initiative.
Based on reforms undertaken in the first year of the National Democratic Alliance (NDA) government, India’s ease of doing business rank went up by four notches to 130 in the 2016 ranking. The department of industrial policy and promotion (DIPP) also involved state governments and ranked states on the basis of 98 parameters last year, in which Gujarat topped the list.
KEY REFORMS
- DIPP sets up special channel to speed up patent grants
- Finance ministry raises mone-tary limits for filing appeals in indi-rect tax cases
- Time taken for obtaining PAN and TAN on eBiz portal brought down to T+1 days
- Provision for online payment of EPFO and ESIC contributions has been introduced tiro Number of documents required for imports and exports reduced to three.
- Physical submission of docu-ments for export and import no longer required; they can be submitted electronically using digital signatures
- Custom ICEGATE Portal integrated with Food Safety and Standards Authority of India (FSSAI), Animal and Plant Quarantine, Drug Controller and Wildlife Control Bureau for imports.
This year, it will rank states on the basis of 340 parameters. The NITI Aayog is also conducting an enterprise survey of business regulatory environment of around 3,000 units, including 500 start-ups, to complement the DIPP survey.
Most of the reforms undertaken by the central government in the last two years include easier company registration, simpler export-import rules and electronic approvals through. It has also taken a number of steps to revamp the tax administration and make the tax regime more friendly and transparent.
It has sought to provide certainty in the transfer pricing regime and reduce aggressive claims made by the tax department. It also backtracked on its stand of levying minimum alternate tax on foreign portfolio investors after a huge outcry from investors. It sought to streamline the tax administration and reduce disputes by minimizing the interface between the tax department and the tax-payer.
It also standardized commonly used terminologies, issued clarifications on matters that resulted in the most disputes and took steps to cut down litigation, especially those initiated by the tax department.
But at the same time, the government has initiated steps to check tax evasion, including enacting stringent provisions to curb black money and negotiating tax treaties to check tax avoidance and evasion by companies.
As part of its efforts to provide more certainty to businesses, the government has also given tax-payers more time to comply and adjust with the government’s policies. For instance, the government decided to follow a phased approach in doing away with corporate tax exemptions, while at the same time rationalizing corporate tax rates.
Former DIPP secretary Ajay Dua said the main achievement of the government in the past two years has been creating awareness about the importance of easier business rules.
“While the centre may have moved on a few fronts, the states and local governments seem to be not fully on board. Even on more crucial areas of business reform such as easier land and labour laws, the centre has not been able to move forward. The goods and services tax (GST) which will bring in much more predictability on indirect tax front is also stuck in the Rajya Sabha,” he added.
