RJS & Atmaram Pai Panandiker Charitable Trust organized a Conference on Ease of Doing Business – Essential Requisites for India on 16th, Nov.2019 at New Delhi

Among the chosen 190 countries2, India ranked 63rd in Doing Business 2020: World Bank Report. In 2014, the Government of India launched an ambitious program of regulatory reforms aimed at making it easier to do business in India. The program represents a great deal of effort to create a more business-friendly environment.

India has emerged as one of the most attractive destinations not only for investments but also for doing business.

Positive changes have led to this impressive improvement in India’s ranking in the EoDB index. India’s major achievement is summarised here:

Construction Permits: India’s ranking on this parameter has improved from 184 in 2014 to 27 in 2019. This improvement has been mainly on the account of a decreasin the number of procedures and time taken for obtaining construction permits in India.

Getting Electricity: India’s ranking on this parameter has improved from 137 in 2014 to 22 in 2019. It takes just 53 days and 4 procedures for a business to get an electricity connection in India

Apart from these significant improvements, among the 190 economies, India ranks 13th in Protecting Minority Investors and 25th in Getting Credit.

The Indian Government has been treating ease of doing business in India as one of their key objectives since years. In line with this objective, GST was implemented, and digitalisation is being focussed on, along with an attempt to provide single window clearance wherever possible.

GST in India was with an intent to promote unified tax across the nation, subsuming multiple central and state taxes. A quick sneak peek into the steps required to be taken by a taxpayer to undertake periodic GST compliances:

• Logging the invoices prepared by it for generation of IRN for invoicing,
• Generate an eway bill for the supplies of goods,
• Filing a cumulative invoice statement after the end of the month in the form of GSTR 1,
• Undertaking reconciliation of input tax credit in their books with the corresponding invoices reported by their suppliers in order to avail credit,
• Determine the amount of ITC eligible after considering the various conditions and compute the amount of ITC which need to be reversed.
• Reconfirming the total output supplies by it in GSTR 3B, knock off the input tax credit based on the reconciliation done by it and paying the GST liability applicable.
• Since the taxpayers are required to reconfirm the same thing in multiple instances and have an option to edit the data even at the summary level, sometimes there is a need of reconciliation between these various data points submitted, including due to gaps occurring due to manual errors.

 India has one of the largest entrepreneurial ecosystems globally which is growing at a rapid pace. Emerging as the third-largest startup ecosystem in the world, India has potential for enormous growth. To boost entrepreneurship, the Government of India has taken a number of initiatives including but not limited to introducing the “Standup India ” flagship campaign in 2015.

Startup Action Plan of 2016 was introduced by the Prime Minister to focus mainly on three key issues:

• Hand holding and simplification
• Funding support and incentives
• Incubation and industry-academia partnership

Several further initiatives have been taken to address these issues. However, there is still required some consideration from the policy and regulatory perspective for a successful startup revolution in India.

Business laws in India

India has codified and uniform commercial laws that include legislations relating to contracts, corporations, exchange control, competition, taxation and the like. Statutes are supplemented by policy pronouncements, press notes, notifications and regulations by Governmental departments and regulators.

The key business related legislations in India are:

• The Companies 2013 Act (which governs the incorporation management, restructuring and dissolution of companies).
• The Indian Contracts Act (which lays down the general principles relating to the formation and enforceability of contracts, consideration, the various types of contracts including those of indemnity and guarantee, bailment and pledge, agency and breach of a contract).
• The FEMA (which provides for India’s foreign exchange management regime and regulates the inflow and outflow of foreign exchange and investment into/from India) and the regulations issued thereunder, together with the rules/circulars/press notes/guidelines issued by the Government of India setting out the foreign investment policy (including sector-specific requirements).
• The SEBI Act (which governs the functions and powers of SEBI, India’s securities market regulator) and the regulations issued thereunder, including, in particular, the SEBI ICDR Regulations (which govern the public offers of securities and offers of securities by listed companies); the SEBI Takeover Regulations (which govern the terms of mandatory and voluntary tender offers for shares of listed companies), the SEBI Insider Trading Regulations (which prohibit dealing in securities when in possession of unpublished price sensitive information), and the SEBI Delisting Regulations (which set out the process for delisting of a listed company).
• The SCRA (which governs listing and trading of securities on stock exchanges in India) and the Listing Agreement with stock exchanges.
• The Competition Act (which regulates combinations (merger control) and anti-competitive behaviour); and
• The Income Tax Act (which prescribes the tax treatment of dividend, capital gains, mergers, demergers and slump sales).

In addition, there are several sector specific legislations (e.g. the Indian Telegraph Act, Drugs and Cosmetics Act, Press Council Act, the Banking Regulation Act, the Insurance Act, and various labour legislations (Industrial Disputes Act etc.) that must also be considered depending on the nature and type of the transaction.

Types of business entities that can be set up in India

Business ventures can be carried on in India through sole proprietorships, partnerships,(including LLPs) or through companies incorporated in India. Additionally, non-residents can carry on certain limited business activities through a branch office, liaison office or a project office.

Initiatives on Improving ‘Ease of Doing Business’ in India.

The Government of India has taken up a series of measures to improve Ease of Doing Business.

The emphasis has been on simplification and rationalization of the existing rules and introduction of information technology to make governance more efficient and effective. The measures taken are:

1. India was ranked 142nd in Doing Business Report, 2015. The World Bank has released Doing Business Report, 2016 on 27th October, 2015. India is ranked at 130 (against a recalculated rank of 134th for 2015). India’s rank has improved in ‘starting a business’, ‘dealing with construction permit’ and ‘getting electricity’ indicators.
2. A report titled “Assessment of State Implementation of Business Reforms” was released on 14th September 2015. The report captures the findings of an assessment of reform implementation by States, led by DIPP, Ministry of Commerce and Industry, Government of India with support from World Bank group and KPMG. This assessment has been conducted to take stock of reforms implemented by States in the period January 1 to June 30 2015 based on a 98-point action plan for business reforms agreed between DIPP and State/UTs and rank them according to the ease of doing business.
3. Process of applying for Industrial License (IL) and Industrial Entrepreneur Memorandum (IEM) has been made online and this service is now available to entrepreneurs on 24×7 basis at the eBiz website. This had led to ease of filing applications and online payment of service charges.
4. 20 services are integrated with the eBiz portal which will function as a single window portal for obtaining clearances from various governments and government agencies.
5. Notification has been issued on 12-03-2015 by DGFT to limit number of documents required for export and import to three.
6. Ministry of Corporate Affairs has introduced an integrated process of incorporation of a company, wherein applicants can apply for Director’s Identification Number (DIN) and company name availability simultaneous to incorporation application [Form INC-29].
7. The Companies (Amendment) Act, 2015 has been passed to remove requirements of minimum paid-up capital and common seal for companies. It also simplifies a number of other regulatory requirements.
8. A comparative study of practices followed by the States for grant of clearance and ensuring compliances was conducted through M/s Accenture Services (P) Ltd. and six best practices were identified. These were circulated among all the states for peer evaluation and adoption. The study has also identified important bottlenecks faced by industries and important steps required to improve the business environment in States.
9. Application forms for Industrial Licence (IL) and Industrial Entrepreneur Memorandum (IEM) have been simplified.
10. Vide Press Note 3 (2014), Defence products’ list for industrial licensing has been issued, wherein large number of parts/components, castings/forgings etc. have been excluded from the purview of industrial licensing. Similarly dual use items, having military as well as civilian application (unless classified as defence item) will also not require Industrial License from defence angle. For these items only an Industrial Entrepreneur Memorandum (IEM) has to be filed.
11. Vide Press Note 5 (2014), initial validity period of Industrial License has been increased to three years from two years. This will give enough time to licensees to procure land and obtain the necessary clearances/approvals from authorities.
12. MHA has stipulated that it will grant security clearance on Industrial Licence Applications within 12 weeks. In matters other than Explosives and FIPB cases, security clearances are valid for three years unless there is a change in composition of management or shareholding.
13. Partial commencement of production is being treated as commencement of production of all the items included in the license. This has obviated the hardship of licensees to get their Industrial License extended even though they have started production.
14. To facilitate investors and to reply to their queries, Frequently Asked Questions (FAQs) by applicants for grant of industrial license have been developed and uploaded on DIPP website.
15. Vide Press Note 4 (2014), the NIC Code NIC 2008 has been adopted, which is the advanced version of industrial classification. This code will allow Indian businesses to be part of globally recognized and accepted classification that facilitate smooth approvals/registration.
16. Vide Press Note 6 (2014), the ‘Security Manual for Licensed Defence Industry’ has been issued. This has obviated the requirement of affidavit from applicants. Earlier, an affidavit signed before Judicial Magistrate was required from the applicant to confirm that they will comply with the safety & security guidelines/procedures laid down by the Ministry of Defence and Ministry of Home Affairs in Government of India. The applicants were facing difficulties in obtaining such affidavit and this was severely delaying the issue of License even after approval of Licensing Committee.
17. A checklist with specific time-lines has been developed for processing all applications filed by foreign investors in cases relating to Retail/NRI/EoU foreign investments. This has been placed on the DIPP website.
18. An Investor Facilitation Cell has been created in ‘Invest India’ to guide, assist and handhold investors during the entire life-cycle of the business.
19. SEZ Units allowed removing goods for repair, replacement, testing, calibration, quality testing and research and development on self-attestation.
20. Process of applying for Environment and Forests clearances has been made online through Ministry of Environment and Forests.
21. Requirement for Environment Assessment Report is required for industrial shed, school, college, hostel for education institution above 20,000 square meters of build-up area up to 150,000 square meters of build-up area.
22. The issue of time taken in registration with Employees Provident Fund Organization (EPFO) and Employees State Insurance Corporation (ESIC) was taken up with the Ministry of Labour and Employment, Director General, ESIC and Central Provident Fund Commissioner. Both the processes have been automated and ESIC registration number is being provided on a real-time basis.
23. An order facilitating revival and rehabilitation of MSMEs through banker’s committee has been issued by Ministry of MSME.
24. A unified portal for registration of Units for LIN, reporting of inspection, submission of returns and grievance redressal has been launched by Ministry of Labour and Employment.
25. DIPP has requested all Secretaries of Government of India and Chief Secretaries of the States/UTs to simplify and rationalize the regulatory environment. In order to improve the regulatory business environment they have been requested to take the following measures on priority:

• All returns should be filed on-line through a unified form.
• A check-list of required compliances should be placed on Department’s web portal.
• All registers required to be maintained by the business should be replaced with a single electronic register.
• No inspection should be undertaken without the approval of the Head of the Department.
• For all non-risk, non-hazardous businesses a system of self-certification should be introduced.

26. Registration process of VAT and Professional tax has been merged into a single process with single ID on 1st January, 2015 by the Government of Maharashtra.
27. Registration for VAT in Delhi has been made online. TIN allotment is done real-time and business can start immediately on receipt of TIN number.
28. The time required for giving a new electric connection in Mumbai has been reduced to 21 days from 67 days. The number of procedures involved has been cut down to 3 from existing 7.
29. Simplified procedure for new electric connection in Delhi with reduced procedures and time.

30. Municipal Corporation of Delhi has launched online application process for grant of construction permits for residential and industrial buildings on 16th March, 2015 and commercial buildings in May, 2015.