Ease of Doing Business in India : the Concept, Issues and Steps Needed to Accelerate Progress, Including Income Tax and Companies Acts Aspects. Since the Prime Minister of India invited overseas entrepreneurs by his first speech from Lal Quila to come and ‘make in India ’, a debate has generated in a big way for facilitating such move, inter-alia, by providing ‘ease for doing business’ because no business enterprise would like to lock its funds in a new venture in India and then run after various Ministries and Depts. of the Govt. at Central, State and Local authorities levels to commence business.
Presently, despite sincere efforts, there are still considerable delays for many businesses for clearances from many Depts. before the business could be commenced. In this discussion, some real life issues in this regard are being discussed concerning some areas. Now you can scroll down below n check more details regarding “Ease of Doing Business in India”
Ease of Doing Business in India : the Concept, Issues & Steps
Real Estate Business
Media reports show that if a person wants to enter into real estate construction business, he will have to seek 40 to 70 approvals, inter-alia, from NHAI, the Pollution Control authorities of Ministry of Environment, AAI, Labour Ministry, Central Ground Water Board, aviation regulators and some other authorities. For various reasons , India is amongst the worst in the world when it comes to dealing with construction permits (rank 183) and enforcing contracts (rank 178) even when the Govt. has set a target of making India one among the top 50 countries in doing business.
Some months back, a news item appeared in the media that the Promoter of Mumbai based Cosmos Group wrote a 15 page note and then shot himself with a .32 calibre pistol. In his note, he blamed local body officials, politicians and complained about red tapism and extortion as reasons to his suicide.
According to a report of Confederation of Real Estate Developers Association of India (CREDAI) on an average, it takes 2-3 years to start a project after the land is acquired. By this time, the cost of land rises by 24 to 30% due to heavy interest payable to banks. Loans are not available for procuring important raw material. Besides, graft costs on account of bribes, etc., are also a reality. These increases get passed on to the customers.
After the construction is complete, there are still too many hassles like getting plinth area certificates regarding the completion of each floor, problems in getting occupancy certificates and obtaining non-agricultural land clearance, etc
Problems under the Companies Act
For starting a company, various requirements of the companies legislation, rules and regulations are to be complied with. It was expected that with the coming into force of the Companies Act, 2013, the position regarding the filing of documents and getting Certificate of Commencement will ease, but that has not happened. Even the Companies Act, 2013 (Act) had to be amended shortly after coming into force of the Act. Even these amendments were not considered adequate.
The Finance Minister on 27th October, 2015 announced constitution of six expert panels to review Companies Act and work on more amendments to the Act, on top of 16 amendments moved for changing the Companies Act almost immediately after the Act came into force. This was done on the representation of India Inc., which found the provisions of the Companies Act too harsh and even later amendments were considered not to have eased the position.
The Groups proposed will go through all recommendations made by the Industry Bodies on their dedicated chapters and finalise the contours of orders on removing the difficulties. The Panels are also to look into easing of the provisions of registry and incorporation, raising of funds, corporate governance and management accounts and auditing, penalty and setting up of National Company Law Tribunal [NCLT]
Restaurant Business
Similarly, in Restaurant business, a large number of clearances are required despite considerable emphasis on easing the doing of business. Licenses are required from fire, health, police, municipalities, taxation, environment and various other Depts. Further laws differ from State to State and this makes opening of branches at various States cumbersome.
It takes months after the business is set up, to make it functioning. Restaurant business continues to be over-regulated and governed by laws, some of which are still archaic and there is need for complete overhauling of the licensing policies. It takes up considerable time to deal with various Depts. separately and if one is stuck up at one stage, he may not be able to move to the other. A single point clearance needs to be provided to cut down the loss of time by moving different Depts. separately.
Compliance of Income Tax Act
In the past – say 50 years – the compliance under the Act was cumbersome. Since then, the Dept. has moved in a big way in facilitating doing of business. There was a time when the taxpayers had to visit Income Tax Offices, in some cases, many times in getting their assessments completed with big bundles containing their books of account and other documents. From that stage, the I.T. Dept. has moved to a situation, where 98 to 99% of the returns filed are accepted and assessments are made without requiring the presence of the taxpayers. Only returns in few cases are scrutinized.
Over the years, the I.T. Dept. has switched over to online functioning and the process is showing continuing progress. Recently, the I.T. Dept. has started a pilot project of using e-mails for sending notices, getting replies as well as carrying out tax assessments in an attempt to make sure taxpayers don’t have to visit I.T. Offices physically in smaller cases. The Central Board of Direct Taxes (CBDT) has identified non-corporate charges at five locations and 100 initial cases for e-hearing.
In order to improve taxpayer services, enhance efficiency and usher in a paper less environment for carrying out assessment proceedings, CBDT has decided to initiate the concept of using e-mail for corresponding with taxpayers and sending through e-mails the questionnaires, notice and getting responses from them using the same medium on a pilot basis. Five non-corporate charges in Delhi, Mumbai, Bengaluru, Ahmedabad & Chennai have been picked up for the pilot project. Initially, 100 cases for e-hearing will be identified in each of these charges and the major part of assessment processing will be conducted in an electronic mode.
The move would eliminate the necessity of visiting Income Tax offices by taxpayers, particularly in smaller cases, involving limited issues and where taxpayer is able to provide details required by the AO without necessitating his physical presence. Cases covered under the pilot project, would be those, which have been selected for scrutiny on the basis of AIR or CIB information or non- matching with 26AS data. Consent of taxpayers will be obtained in the beginning and cases of only willing taxpayers will be considered under the pilot project.
A lot more has been done in earlier years but cannot be included in this short write-up. The process is ongoing. Recently [on 27th October, 2015], the FM has constituted a Committee to simplify further the provisions of the I.T. Act, 1961. One of the terms of reference of this Committee (numbered 2) is to study and identify the provisions, which are impacting the ease of doing business. After the recommendations of the Committee are received and implemented, the I.T. bottlenecks, which could be said to be impacting the ease in doing business will be removed and further substantial progress in this respect would be forthcoming and the I.T. Dept.’s working will be a facilitator in easy business in India
Shutting Down
Shutting down businesses should be as less cumbersome as starting it. Regretfully, presently it is not so. An enterprise, desiring to close down, has to show past 3 years’ financial results (audited). The business has to be kept running for one year after filing the proposal for closure. This causes hardship and is also, apparently, unfair.
Concluding Comment
In this write-up, a sample study has been attempted in regard to ease of doing business concerning some areas. There could be many more, where much has been done. The efforts cannot be onetime exercise. These have to be a continuing process, showing improvements year after
The Govt. is continuously making efforts to improve the situation. India ’s ranking rose to 130 from 134 – four points up – according to World Bank’s ease of doing business study, which ranks 189 countries. The up-going in rank has been possible by significant efforts for improvement in parameters like ease in starting new businesses and availability of electricity. The P.M. has already made a commitment that by 2019, every city and village in India will have electricity. According to the World Bank report (supra), it now takes 29 days to start a business in India as against 127 days in 2004.
However, much progress in this matter depends on how strong is the core infrastructure set up in the country such as in transport sector for movement of goods through land, air and sea routes, better custom related processes, availability of power [according to the World Bank EODR (supra), India ranked 70 (out of 189) on the power supply front, which is expected to improve as promised by the P.M.], fair labour policies, lesser legal tangles, adequate banking and communication and e-commerce facilities, changes in old laws or their scrapping such as traditional Shops and Establishment Act fast and introduction of new laws like GST will ease the multi taxation problem.
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