Monday, September 15, 2014

Ease of Doing Business - Challenges Persisting

The new government has been brought to power by electorate of our nation along with large expectations by industry, businesses and professions and other stakeholders of the Indian economy. The Finance Minister Shri Arun Jaitley as well as the Prime Minister Sh. Narendra Modi have committed to the countrymen that the government will take all necessary policy actions and legislative changes to ensure ease of doing business in India. Hon'ble Prime Minister has often been propounding while addressing industry bodies in India as well as overseas that Government of the day shall act as a facilitator and a catalyst to create appropriate investment climate in the country.
The list of areas where concrete and immediate action is necessary is quite long. Though the government has initiated notable actions in certain areas but speeding up these actions and encompassing broader and crucial areas and segments is warranted. Some of the major issues on which urgent and immediate action is necessary are:

  • Tax Laws: The direct tax laws as well as indirect tax laws, including the various rules, guidelines and notifications issued there under are very complicated. The approach of the tax department needs to be business friendly and should provide necessary comfort to tax payers. There is an essential need to eradicate illogical and unwarranted compliance's and procedures, during the course of assessment and to avoid continuous appellate litigation. 
  • The surveys, searches and raids are against non- intrusive approach to achieve tax compliance. The intrusion in privacy of Citizen needs to be only permitted in exceptional cases with approval at highest level of Polity.
  • In view of detailed examination and report by the tax auditors, the scrutiny assessment may be done only in very exceptional cases. It is important to provide only email or video contacts between the assessees and tax authorities, to eradicate corruption. The Inspector Raj in the taxation wing of the government need to be completely done away. Genuine refunds need to reach tax payers in time.
  • Company Law: The Companies Act 2013 have brought in certain very good concepts for improvement of corporate governance but have also introduced a large number of unnecessary procedures, compliance's and restrictions even on private limited companies and other companies in which public are not substantially interested. The penalties and prosecutions need to exist only where public interest is materially impacted. While a comprehensive legislative amendment need to be brought, it is important to stay the operations of the Companies Act 2013.
  • In any case, as an immediate measure, all small companies, private limited companies and companies in which public are not substantially interested need to be exempted from the provisions relating to deposit from shareholders, Relatives of directors, inter- corporate loans, loans to directors and related bodies, issuance of further capital, acceptance of share application money, related party transactions and several other provisions, be exempted as a class of companies (all companies in which public is not substantially interested) by notification in terms of adequate power available with the government. The delegated power to the bureaucrat has to be limited significantly.
  • Labor Laws: The age old labor laws including P.F., E.S.I, Workmen Compensation, Industrial Disputes, and Payment of Wages legislations need to be progressive. The day-to-day corruption impacting obtaining various government approvals, power connections, licenses, approvals, change of land use and in so many other areas are to be addressed with electronic transparent Governance. The availability of Land, equity and debt finance, power and other resources to small, medium and large scale sector are crucial for sustained growth. The seriousness of the current Government to bring improvement and relaxation is not getting delivered as the implementing machinery mindset is still working in old feudalistic fashion. The detailed notifications one after another contain restrictive clauses, which at times defeat the real intent and resolve of the Government to ease business environment. The political leadership needs to address red tape and negative mindset of top and middle level officials by inculcating a mix of education, motivation, and carrot and stick approach. Let there be trust, amongst bureaucrats, polity, judiciary and private sector that all stakeholders are functioning towards nation building. The Indian public will support all such moves.


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