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Ease of Doing Business and INDIA

9 March 2020   

Ease of doing business is an index published by the World Bank. It is an aggregate figure that includes different parameters that define the ease of doing business in a country.

How it is measured?

It is computed by aggregating the distance to frontier scores of different economies. The distance to frontier score uses the ‘regulatory best practices’ for doing business as the parameter and benchmark economies according to that parameter.

Why the Ease of Doing Business is Important?

Ease of doing business index is important because higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights. Empirical research funded by the World Bank to justify their work shows that the economic growth impact of improving these regulations is strong.


Ease of Doing Business and INDIA

India has recorded a continuous improvement in its Ease Of Doing Business ranking issued by the World Bank on account of steps taken by the government.


India jumped 14 places to the 63rd position on the World Bank's Ease Of Doing Business ranking released earlier, riding high on the government's flagship 'Make in India' scheme and other reforms attracting foreign investment. The report ranks 190 countries.
"As a result of continued efforts by the government, India has improved its rank by 79 positions in the last five years (2014-19).
India has improved its rank in 7 out of 10 indicators and has moved closer to international best practices.
"Significant improvements have been registered in resolving insolvency, dealing with construction permits, registering property, trading across borders and paying tax indicators.
The government is targeting to join the 50 top economies on the Ease Of Doing Business ranking.

Central Government Initiatives

FOR STARTING A BUSINESS

1. Permanent Account Number (PAN), Tax Deduction & Collection Account Number (TAN), Director Identification Number (DIN) have now been merged into a single form (SPICe) for company incorporation.
2. Five-page form and other attachments for reserving the name of the Company with the Ministry of Corporate Affairs has been simplified into a simple web service with only three fields to be filled.
3. Registration under Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organisation (EPFO) are available at Shram Suvidha portal as a common online service with no physical touch point.
4. No requirement of inspection for before registration under Shops & Establishment Act in Mumbai and Delhi.
5. Companies Act was amended to eliminate the requirement of a common company seal.


FOR DEALING WITH CONSTRUCTION PERMITS

1. Municipal Corporations of Delhi, as well as Municipal Corporation of Greater Mumbai, have introduced a fast track approval system for issuing building permits with features such as Common Application Form (CAF), provision of using digital signature and online scrutiny of building plans.2. Delhi has uniform building by-laws that allow for risk-based classification regimes for different building types. It has a provision of deemed approval of sanctioning building plans within 30 days.
3. For construction permits, the time reduced from 128.5 to 99 days in Mumbai and from 157.5 to 91 days in Delhi between Doing Business 2018 and 2019 reports.
4. A total number of procedures reduced to 20 in Mumbai and 16 in Delhi.
5. Cost of obtaining construction permits reduced from 23.2% to 5.4% of the economy’s per capita income.15

FOR TRADING ACROSS BORDERS

1. The Central Board of Excise and Customs (CBEC) has implemented the ‘Indian Customs Single Window Project’ to facilitate trade. Importers and exporters can electronically lodge their customs clearance documents at a single point.
2. The number of mandatory documents required for customs purposes, for both import and export of goods, has been reduced to three.
3. e-Sanchit, an online application system, allows traders to file all documents electronically.

4. The electronic self-sealing of the container at the factory has reduced the time and cost for exporting firms.
5. A computerized risk management system has brought transparency and reduced the frequency of custom inspections significantly.
6. Central Board of Indirect Taxes and Customs has provided a facility for the Advance Bill of Entry (Advance Import Declaration).

FOR ENFORCING CONTRACTS

1. The Commercial Courts and Appellate Division of High Courts have been established in Mumbai and Delhi.
2. National Judicial Data Grid (NJDG), provides case data including case registration, cause list, case status and orders/judgments of courts district-wise across the country. NJDG is open for the public since 2015.
3. New cases in district courts are assigned to Judges randomly through an automated system in Delhi and Mumbai.
4. The e-filing of cases has been introduced in district courts of Delhi and Mumbai.21 5. A case management tool has been developed with the functionality of sending a notification to lawyers, viewing court orders/judgments, tracking the status of cases, semi-automatically generate court orders, etc.

FOR GETTING CREDIT

1. Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) is a geographically unified electronic registry that provides for registration by asset type. Since 2017, CERSAI also provides searches through the debtor's name.
2. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) (Central Registry) Rules, 2011 was amended to include additional types of charges, including a security interest in - immovable property by the mortgage, hypothecation of plant and machinery, stocks, debt including book debt or receivables, intangible assets, patent, copyright, trademark, under-construction building.
3. The definition of property, which now includes immovable as well as intangible, allows CERSAI to register these additional charges.25

FOR GETTING ELECTRICITY

1. Electricity connection is provided within 7 days if no Right of Way (RoW) is required and within 15 days where RoW is required.
2. Service line cum Development charges are now capped at US$ 357.6 in Delhi.
3. The number of documents required for getting electricity connection has been reduced to two and no physical documents are accepted.
4. A total number of procedures reduced to 3 in Delhi and 4 in Mumbai.

FOR REGISTERING PROPERTY

1. All sub-registrar offices have been digitized and its records have been integrated with the Land Records Department, in both Delhi and Mumbai.
2. In Mumbai, all property tax records have been digitized. Property is mutated at automatically after registration. The digitization of property records ensures transparency and allows citizens to ascertain the history of transactions in digital mode.
3. Online service for charges search at Registrar of Companies reduces the time taken for this procedure significantly.
4. Statistics regarding the number of land disputes at Revenue Courts are available online in both Delhi and Mumbai.

FOR RESOLVING INSOLVENCY

1. The Insolvency and Bankruptcy Code of 2016 has introduced new dimensions in resolving insolvency in India. It is India’s first comprehensive legislation of corporate insolvency.
2. Under Fast-track Corporate Insolvency Resolution Process (CIRP) for mid-sized companies, the process for insolvency shall be completed within 90 days with a maximum grace period of another 45 days.

FOR PAYING TAXES

1. Reduction of corporate tax from 30% to 25% for mid-sized companies.
2. Domestic companies can opt for concessional tax regime @ 22% (effective tax rate: 25.17% inclusive of surcharge and cess). Such a company cannot claim any income tax incentive or exemption. Such companies are not liable to pay the Minimum Alternate Tax (MAT)
3. The tax rate for new domestic manufacturing companies is now 15% (17.01% inclusive of surcharge and cess). Companies that have been incorporated on or after 1st October 2019, making fresh investment manufacturing and commencing production on or before 31 March 2023, may opt for such a concessional tax regime.  Such companies cannot avail of any other income tax exemption/ incentive under the Income-tax Act.
4. A company that does not opt for the above concessional tax regime and avails any tax exemption/ incentive, shall continue to pay tax at pre-amended rates. However, the option of availing the lower tax regime of 22% can be opted for after the expiry of tax the holiday/ exemption period. Once the same opts for it cannot be subsequently withdrawn by the taxpayer. MAT rate for companies availing exemptions/ incentives reduced from 18.5% to 15%.
5. Robust IT infrastructure of online return filing for Indian taxpayers.
6. The Goods and Service Tax came into effect from 01 July 2017. It subsumes eight taxes at the Central and nine taxes at the State level.
7. The Employee State Insurance Corporation (ESIC) has developed a fully online module for electronic return filing with online payment. This has substantially reduced the time to prepare and file returns.
8. With the introduction of the e-verification system, there remains no physical touchpoint for document submission to income tax authorities.

MEASURES UNDERWAY

1. Paying Taxes: GST implementation.
2. Resolving Insolvency: Increased usage of Fast-track Corporate Insolvency Resolution Process (CIRP) as more insolvent companies opt for reorganization plans instead of liquidation.
3. Enforcing Contracts: the Faster resolution of commercial disputes through dedicated commercial courts.40 Registering Property: Digitization of land records and maps will bring transparency on encumbrances and ease the process of registering property.

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