Tiresome rules out,trust-based model in

New Delhi: Finance minister Nirmala Sitharaman emphasized on trust-based governance in her budget speech, as she proposed to reduce 39,000 compliances and decriminalize 3,400 legal provisions, aimed to enhance ease of doing business for companies across the spectrum.

“For enhancing ease of doing business, more than 39,000 compliances have been reduced and more than 3,400 legal provisions have been decriminalized. For furthering the trust-based governance, we have introduced the Jan Vishwas Bill to amend 42 Central Acts. This budget proposes a series of measures to unleash the potential of our economy,” Sitharaman said in her budget speech on Wednesday.

Industry experts welcomed the provisions to reduce compliances, particularly, the Jan Vishwas Bill, which they said would make ease of doing business a key economic lever, while signalling a technology-led transition towards paperless compliance.

“While I eagerly await the fine print, continued focus on decriminalization of employer compliance via the Jan Vishwas bill is expected to mitigate deeply ingrained colonial hostility against India’s entrepreneurs. There is a clear push towards building a trust-based governance model,” said Rishi Agrawal, CEO and co-founder of Teamlease Regtech.

He added that extending the scope of Digilocker to include business entities is a welcome step towards digitizing compliance.

Among a series of measures, the finance minister said the Permanent Account Number (PAN) will be a common identifier for all digital systems of specified government agencies for business establishments required to have a PAN. This will eliminate the need to have over 20 different enterprise identities in the current environment, reducing inefficiency and duplication of effort. The provision will have legal mandate, effectively fortifying the provision for businesses.

The government has also proposed to create a unified filing process, which will do away with the requirement of separate submission of same information to different government agencies. The minister said that the filing of information or return in simplified forms on a common portal, will be shared with other agencies as per filer’s choice.

“These proposals are definitely a step in the direction to simplify compliances and boost investor confidence,” said Karishma Phatarphekar, partner at Deloitte India.

Sitharaman said financial sector regulators have been requested to carry out a comprehensive review of existing regulations, such that regulations can be further simplified and the cost of compliance for companies reduced.

“For this, they will consider suggestions from public and regulated entities. Time limits to decide the applications under various regulations will also be laid down,” she added.

However, Deloitte’s Phatarphekar pointed out that the budget had widened the tax authorities’ power to withhold any refunds to a taxpayer. “This would adversely affect honest taxpayers who prefer to litigate after paying taxes instead of preferring stays against demand. The wait for refunds increases manifold and will cause them to approach already over-burdened constitutional courts. Giving powers to tax authorities that can be potentially abused goes against the government’s motto of ease of doing business,” she cautioned.

This comes even as the government has attempted to reduce litigation by introducing the post of a Joint Commissioner (Appeals) for deciding appeals arising from orders passed by officers below the rank of deputy commissioner. “This would significantly reduce the burden on the existing Commissioner (Appeals). This would lead to parallel disposal of small appeals and reduce pending litigation,” she noted.

For MSMEs, the government introduced relief measures under Vivad Se Vishwas, where in case of failure to execute contracts given by government or government undertakings during the covid-19 pandemic period, 95% of the forfeited amount relating to bid or performance security will be returned. Further, for settling contractual disputes of the government and government undertakings when the arbitral award is under challenge in a court, a voluntary settlement scheme with standardized terms will be introduced.

“This will be done by offering graded settlement terms depending on the pendency level of the dispute,” the minister said.

There are other measures towards increasing ease of doing business for investors and large corporations, especially those in the International Financial Services Centre, GIFT City. The government has proposed to delegate powers under the SEZ Act to International Financial Services Centres Authority to avoid dual regulation and setting up a single window IT system for registration and approval from IFSCA, SEZ authorities, GSTN, RBI, SEBI and IRDAI.

The budget has also proposed the setting up of an Exim Bank subsidiary for trade re-financing for encouraging emerging sectors such as aircraft and ship financing activities and also setting up data embassies at GIFT City, which would facilitate digital continuity solutions for countries seeking such solutions. The proposal also includes amending IFSCA Act for statutory provisions for arbitration, ancillary services, and avoiding dual regulation under SEZ Act.

“The policy support laid out by the Union government will certainly act as a catalyst in expediting the growth of GIFT City, thus making it a vibrant global financial hub for domestic and international entities. The far-reaching measures announced in the budget will go a long way in strengthening the ease of doing business in IFSC at GIFT City,” said Tapan Ray, MD and Group CEO, GIFT City.

shashank.mattoo@livemint.com