The Journey Ahead for Ease of Doing Business in India

For any developing or developed economy, the key to entrepreneurship, innovation or wealth creation lies in the ease of doing business in that country. In the recent years, India has emerged as one of the most attractive destinations, not only for investments, but also for doing business.

India's huge domestic consumption, led by the private sector, has played a major role in the country's growth. India has an estimated middle class of 400 million people who are the main drivers of consumption expenditure. This emerging middle class and increasing disposable incomes are the largest factors behind the increasing domestic consumption in India.

It is estimated that the private consumer market in India will increase four times by 2025. The present government is also focusing on rural areas and farmers, as rural India is also emerging as an upcoming market for all types of consumer goods.

A host of government initiatives has also enabled India's investment growth, which includes developing India's financial system, improving the infrastructure and relaxing FDI norms. The Government has propagated an investor-friendly FDI policy, in which most sectors are open for 100% FDI under the automatic route. India's FDI policy is also reviewed on an ongoing basis to ensure that India remains an attractive and investor-friendly destination.

Central Government Initiatives

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.8
2. Elimination of incorporation fee for companies with an authorised capital of up to Rs. 15 Lakh.
3. Five-page form and other attachments for reserving the name of the Company with the Ministry of Corporate Affairs have been?simplified into a simple web service with only three fields to be filled.9
4. Registration under Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organisation (EPFO) is available at Shram Suvidha portal as a common online service with no physical touchpoint.10
5. No requirement of inspection before registration under the Shops & Establishment Act in Mumbai and Delhi.11
6. Companies Act was amended to eliminate the requirement of a common company seal.

Paying Taxes

1. Reduction of corporate tax from 30% to 25% for mid-sized companies.35
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)36
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.36
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 of the?lower tax regime?of 22% can be opted for after the expiry of tax during the holiday/ exemption period. Once the same has opted for it cannot be subsequently withdrawn by the taxpayer. MAT rate for companies availing exemptions/ incentives reduced from 18.5% to 15%.36
5. Robust IT infrastructure of online return filing for Indian taxpayers.37
6. The Goods and Service Tax came into effect on 01 July 2017. It subsumes eight taxes at the Central and nine taxes at the State level.38
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.
9. Instead of filing 3 GST returns, the taxpayer has to now file only 2 returns.?

Investment Opportunities in India

Fore more information reach out https://indiainvestmentgrid.gov.in/opportunities

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Have questions or feedback? Reach out CA CA Neetu Jain