Govt hopes to breach 80s in ease of doing biz ranking, but traders sceptic

The government is confident that India would enter the late 80s in the World Bank’s annual ease of doing business report — up from 100 last year — on account of implementation of the goods and servicesta(GST) and the Insolvency and Bankruptcy Code (IBC). 

But, traders, whose voices will be reflected in the rankings slated to be released on October 31, claim the government’s optimism does not reveal Rs 80-100 billion Integrated GST refunds they are yet to get. 

Last year, India had improved its position by 30 spots. This year, the World Bank will consider reforms introduced till May 1.

“The time taken to file and pay the four taxes subsumed by the GST has gone down from 105 hours to 36 hours,” said a senior Department of Industrial Policy and Promotion (DIPP) official, adding: “We expect a much better performance this year, in the category of paying taxes, besides on such parameters as trading across borders and resolving insolvency.”

Commerce and Industry Minister Suresh Prabhu had last week also hinted the government was expecting a better ranking. 

Not everyone shares the government’s optimism.

The Federation of Indian Export Organisations (FIEO) has pointed out that states continue to refuse payment of input tax credit, which has climbed up to Rs 150 billion. The FIEO has blamed pending GST returns leading to a lack of working capital, as the primary reason exporters cannot take the benefit of a weaker rupee.

Getting states to pay up has been difficult. 

Andhra Pradesh, Uttar Pradesh, Bihar, and Chhattisgarh have said they are out of funds, FIEO President Ganesh Kumar Gupta said. This continues to affect small, medium and micro traders, who are still overlooked by banks while providing trade credit. 

On resolving insolvencies, the government is set to claim the IBC procedure as a major hit among companies stuck in gridlock of the earlier liquidation process. It estimates that claimants have realised almost 59 per cent of claims. 

However, a report by Debtwire Asia has pointed out that on average, it took 275 days to approve a resolution plan from the time the corporate debtor was admitted under the Corporate Insolvency Resolution Process of the IBC. The government’s estimate is 233 days.

On trading across borders, India’s rank had taken a hit last year. This year, the government plans to showcase round-the-clock operations of major ports, inauguration of a single-window interface for exports, and direct port delivery services to reduce turnaround times of ships.

India also lagged in areas such as starting a business, enforcing contracts, and dealing with construction permits. While India’s rank in dealing with construction permits was a low 181 among nations, it ranked 164 in enforcing contracts.

Last year’s report had not taken into account demonetisation, which led to widespread disruption in business and also pulled down economic growth. It did not consider the GST either. 

Junaid Ahmad, country director of the World Bank, had said they were not factored in because the report only took into account comparable factors across the world.

Eyes set on higher rank
Reforms in major areas

Paying taxes
  • Overall compliance burden went down as four major taxes subsumed under GST
  • GST refunds for exporters being cleared systematically
  • Number of hours required to prepare, file and pay for taxes went down from 105 to 36
Resolving insolvency
  • Realisation by admitted claimants at Rs 494.30 billion
  • Total admitted claims for insolvency under IBC at Rs 838.09 bn or 58.98%
  • Average number of days required for resolving insolvency at 233, expected to go down
Trading across borders
  • Risk management system waives insection requirement for 80% of products 
  • E-Sanchit mobile app makes e-payment of customs documents
  • Number of major seaports made operational 24*7