Has GST helped improve India’s Ease of Doing Business Rank?

Back in 2014, India was ranked 142nd among 190 nations on the Doing Business Index. Five years of radical economic reforms and the introduction of a new indirect tax system have witnessed India steadily climbing up this index ladder. From 142nd in 2014 to 77th position last year and now to 63rd position as of October 2019 (as per World Bank’s ‘Doing Business’ 2020 report), India has come a long way.

This is the third consecutive year India has made waves on the Doing Business ranking. India improved on six of ten parameters set by the World Bank as against eight last year becoming among top ten improvers for the second time in a row. This year alone, India has moved up by a phenomenal 14 spots on the Doing Business Index, a feat achieved by most countries over a 20 year period. And while it's commendable that India is putting a lot of effort to climb up in rankings, the country’s main aim is to break in to the top 50 and eventually top 25 rankings. Simeon Djankov, Director of Development Economics at the World Bank is confident India can achieve this feat in the next year or two. Finance Minister, Nirmala Sitharaman has spoken of the Government’s keen interest in improving rankings and keeping that goal in mind, they are prepared to implement all sorts of reforms - especially under GST and GST Compliance.

India had already covered significant ground to make the leap to a higher index ranking by easing the payment of taxes and resolving insolvency. Big ticket measures like the rate cut in Corporate Income Tax and lower rates for Employee Provident Funds have already proven to be beneficial (and have also fulfilled a prescribed parameter).

What could be the next possible steps for making this climb? 

GST simplified

In a bid to curb errors in tax filing, the Government plans to introduce a new GST return filing mechanism in April 2020. The new return filing system will include simplified return forms for ease of filing across all categories of taxpayers registered under GST.

E-invoicing 

A reform under GST 2.0, e-invoicing will be introduced in a phase wise manner starting January 2020. A standardised invoice template has already been designed and distributed by the Government and automated accounting softwares are required to use this standard format for generating invoices. The GST Network will electronically authenticate and issue identification to each invoice for ease of use at other portals for filing returns and generating e-way bills. This mechanism will streamline the way for efficient and error free filing of returns. The Goods and Service Tax Network CEO, Prakash Kumar stated that while e-invoicing will be initiated as a voluntary requirement, it might be legally mandated in the future. 

Strict measures to curb evasion

With over Rs.45,000 crores being reported under fraudulent input tax credit since the implementation of GST, the Government is all set to enforce tough measures to curb tax evasion. While these measures are still being discussed, immediate measures are most likely to include identification of defaulters and distribution of mass-scale notices to non-filers of GSTR3B. Defaulters will be identified if they have failed to file returns for six or more return periods. Registered taxpayers will have to file returns either on a monthly or quarterly basis failing which they might face cancellation of GST registration.

Ease of Compliance

Experts have suggested that India should do away with multiple tax slabs under GST for greater ease of compliance and follow a one tax rate on taxable goods under GST. Multiple slabs often create classification disputes (an ongoing issue) necessitating blockage of funds and delays in refunds.

India’s steady climb up the ‘Doing Business’ ladder comes at a time when international economic institutions and ratings agencies have forecast a slash in India’s economic growth. Nevertheless, India’s continued reform efforts especially under trade and taxation have earned them commendations from international financial institutions including the World Bank.

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