India may question its poor ranking in World Bank's ease of doing business index

The government may contest some of the conclusions of the World Bank’s Ease of Doing Business rankings that places India at a lowly 130 among 190 countries.

The government believes the methodology may not have truly reflected many reforms, particularly in tax rates and administration, hammering down the overall rankings and creating an impression that India continues to remain a dodgy place to do business in.

For instance, the World Bank placed India at 172 in the “payment of taxes” parameter in the latest report released in October 2016, according to which Indian businesses are required to pay an average of 25 number of taxes.

A survey-based report by the industry department, however, found that Indian businesses actually pay 9 (nine) number of taxes.

Likewise, the World Bank has given India a score of 4.3 out of 100 for the indicator ‘post-filing index’, which is based on components such as the time to comply with VAT or GST, corporate income tax audit.

The Department of Industrial Policy and Promotion (DIPP) report says the methodology used for calculation of time taken to revise a corporate tax return appears to be incorrect, as in India filing of corporate returns and tax payments are fully electronic.

The report says that this—the poor rankings on the 'post-filing index-- grossly overstated, needs to be contested and corrected by World Bank.

"The measurement based on the methodology adopted for calculation of time taken to amend/revise a corporate tax return appears to be incorrect...In India, filing of the corporate return and for tax payment is completely electronic. Therefore, this time is grossly overstated and needs to be corrected by World Bank," DIPP said.

Similarly, in case of labour taxes, it does not take 24 hours (as concluded by the World Bank), but 4 hours to collate data from accounting records to prepare details of Employee's Provident Fund (EPF).

The  DIPP has asked survey respondents to carefully consider certain issues and analysis that will make India's ranking better in the parameters, particularly "payment of taxes", thereby, improving India’s overall ease of doing business rank.

April is crucial as contributors (such as lawyers, accountants, judges, who use government services) begin their survey for the making of the World Bank’s Doing Business report, which will be published later this year, a senior government official told Moneycontrol.

The Narendra Modi-government, which has vowed to remove red-tape, eliminate procedural delays and turn India into a sought-after investment destination, has set a target of leapfrogging to a rank of above 50 in the doing business report in the near future.

Business leaders often cite energy shortages and land problems to arbitrary tax laws and archaic labour rules as among the key hurdles that make investors shy away from India, which otherwise should count as one of the most attractive markets in size and scale.

The World Bank every year publishes its "Doing Business" report that ranks 190 countries on how easy it is for companies in terms of doing business, as well as following certain regulations based on ten parameters such as starting a business, getting electricity, dealing with construction permits, getting credit, paying taxes, protecting minority investors, resolving insolvency and more.

A high ease of doing business rank implies that the regulatory environment is more conducive in the country, for beginning as well as continuing operations of an organisation.

New Zealand bagged the top slot in the ease of doing business index last year, followed by Singapore and Denmark.