As per Prime Minister Narendra Modi’s statement at Gauhati High Court’s platinum jubilee celebrations in April 2023, the government has identified and struck down more than 2,000 British-era central laws and ended more than 40,000 compliances. "Many of our laws date back to the British era and have completely lost their relevance now. The government is making constant efforts to review such laws," the PM had said.
In 2020, India was ranked 63rd out of 190 countries in the World Bank’s Ease of Doing Business rankings, a huge stark improvement from the 142nd rank in 2015. The index considered various indicators such as starting a business, dealing with permits, registering property and enforcement of contracts, among others.
Joebin Devassy, senior partner at law firm Desai and Diwanji, noted that the government has focused on four kinds of reforms. “First, transforming big-ticket legislative reforms such as implementation of the IBC and GST. Second effecting compliance related changes by bringing in laws such as Jan Vishwas, third decriminalisation of offences and finally getting rid of archaic laws.”
Making business in India easier
In line with the PM’s thought, and to enhance Ease of Doing Business (EODB), the government in late 2022 introduced an entire law called the Jan Vishwas Act, to promote trust based governance. The law aims to decriminalise 183 minor offences under 42 central laws and covers compliances relating to 19 central ministries. The law got presidential assent in August 2023, shortly after the monsoon session of the parliament.
The Jan Vishwas Act decriminalises offences in hyper-technical laws such as the Agricultural Produce (Grading and Marking) Act, 1937, counterfeiting grade designation marks is punishable with imprisonment of up to three years and a fine of up to Rs 5,000. The Bill intends to replace this with a penalty of Rs 8 lakh.
Similarly, to enhance EODB, the government in the Union Budget 2023 announced that more than 39,000 compliances have been reduced and more than 3,400 legal provisions, which had criminal implications, decriminalised. To reduce overlapping compliances in labour laws, the government introduced new labour codes in 2019 and 2020 in place of the existing labour laws.
Risihi Agrawal, Chief Executive Officer of compliance solutions software company Teamlese Regtech, hailed the government’s decision to reduce compliances noting that the Jan Vishwas Act has moved the needle in the right direction but there is much to do. He said, “Close to 68 percent of criminal punishments for non-compliance arise from the labour laws, there is an urgent need to reform them and notify the new labour code as soon as possible.”
New regimes to boost confidence
The Insolvency and Bankruptcy Code (IBC), 2016, and the Goods and Services Tax (GST) Act, 2017, were entirely new pieces of legislation that revolutionised the way businesses functioned. The IBC was brought in to strengthen corporate insolvency laws while GST eliminated multiple layers of taxation by introducing a unified tax system. The IBC also brought in time frames to resolve corporate insolvencies. As per data from the Insolvency Bankruptcy Board of India (IBBI), which governs the IBC:
- IBC has rescued 2,622 companies (720 through resolution plans, 1,005 through appeal or review or settlement and 897 through withdrawal) till June 2023.
- 26,000 cases involving an underlying default amount of Rs. 8.23 lakh crore have been withdrawn before their admission.
As per data available on the Department of Revenue’s website:
- Indirect taxes collection before GST in the year 2016-17 stood at Rs 8,61,625 crore, the collections.
- In 2021-22 four years after GST was introduced it stood at Rs 12,89,662 crore. Of the Rs 12,89,662 crore, GST contributed to about Rs 6,98,114 crore.What did not work?
While the laws brought in to enhance EODB had grand visions, their implementation has been less than satisfactory.
- A tribunal to adjudicate disputes arising from the GST law was notified only in 2023, six years after GST legislation was introduced in 2017.
- As of September 2023, the government notified the establishment of 31 benches of the GST appellate tribunal in 28 states. However, the tribunals are yet to function.
- Not notifying the GST tribunals led to a flurry of litigations in high courts. According to a parliamentary response from March 2023, the ministry is fighting over 1.5 lakh cases across India.
Despite bringing a new labour code to reduce compliances, and getting them passed in the parliament three years ago, the government is yet to notify rules to operationalise them, as a result, they continue to remain just on paper.
Mixed-bag success
Rudra Kumar Pandey, partner at law firm Shardul Amarchand Mangaldas, said, “The government has eased the compliance process under many Acts. Due to the reforms, citizens and businesses are operating without fear of imprisonment due to minor compliance defaults. Similarly, reforms such as online filing of returns, automated renewals for licences and certificates have reduced the burden on government departments as well.”
He, however, highlighted that some penal provisions of laws such as the Legal Metrology Act 2009 are still prone to abuse and noted that many such laws are still to be amended to enhance EODB.
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