New Delhi: India may have made big strides on the World Bank’s ease of doing business index in the five years the BJP government of Prime Minister Narendra Modi has been in power, but not all benchmarks on that index have kept pace with those strides.
Businesses in India spent more time in paying their taxes in 2018-19 as compared to 2013-14, while the time taken to enforce contracts and register property has also increased in the last five years.
The ease of doing business rankings measure countries across parameters like starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
How India fared on various parameters
Companies in India spent 252 hours per year in paying taxes in 2018-19 as against 243 hours in 2013-14. In comparison, companies in Singapore spent only 49 hours in paying their taxes — the lowest of any country.
The enforcement of contracts remains another area where the government has not managed to improve India’s performance. The index shows that it took 1,445 days — nearly four years — to enforce contracts in India in 2018-19, as against 1,420 days in 2013-14. It also costs nearly one-third of the claim value to enforce a contract.
The time for the registration of property, meanwhile, also increased to 58 days from 47 days in these five years.
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However, in terms of the overall ease of doing business rankings, India has risen to rank 63 in the 2020 report released earlier this week, compared to rank 142 in the 2015 report. Data shows that India has improved on parameters like resolving insolvency, starting a business, dealing with construction permits, and getting electricity.
What Modi govt has done
The Modi government has taken many steps to improve the ease of paying taxes by reducing compliance requirements for direct tax payments, and moving more mandated payments online.
It has also looked to minimise the interface between the taxpayer and the tax department by moving return filing, return verification and assessments online.
However, the implementation of the goods and services tax from 1 July 2017, which substantially increased the compliance burden on many firms, seems to have made paying taxes more cumbersome.
This is clear from the fact that the time spent on filing taxes, which stood at 214 hours until April 2017, increased to 275 hours by April 2018.
GST changes have made things tougher
Analysts point out that the number of changes made to GST return forms as well as the frequent changes to tax rules have made filing GST returns tougher, despite the fact that the entire tax return filing system is online.
“Too many changes in rules and return forms, including changes in tax rates, have made compliance onerous… Businesses that pay taxes fail at doing the full-fledged reconciliation of input tax credit with books of accounts, making things even more difficult for them,” said Archit Gupta, founder and CEO of ClearTax, a GST compliance provider.
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