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The following suggestions may also kindly be considered while finalizing the New Industrial Policy for the state/country:-

1) Abolition of the concept of minimum charges and minimum contract period in power supply agreements by State Electricity supply companies

a. When the factories are running well, the conditions of minimum charges and minimum contract period imposed by the Power Supply monopolies do not hurt them, but when the factories are in trouble and not running well, these two conditions hurt them seriously and drive them into bankruptcy very fast.

b. There is power shortage in the state where demand for power is considerably more than its supply. In this situation, there is no loss to the Power Supply companies if any factories are not drawing power at all or adequately, and hence, such minimum charges are not justified.

c. All costs of providing connection (poles to the demand point, cables, transformers etc) are already borne by the consumer and Power Supply company is not incurring any additional cost in providing power connection, and hence, imposition of such charges are completely unreasonable which hurt the factories very hard in times when they are in trouble.

2) Abolition of the concept of C form under the Central Sales Tax Act

a. A lot of emphasis is being placed on C form, by the state governments, although the governing act is a central act, especially after 2002 when such C forms were made mandatory in almost all cases. C forms serve only one purpose, of ensuring that the goods have indeed not been sold within the state but outside the state. There is no other purpose a C Form serves.

b. Except in a miniscule number of cases where consumers make interstate purchases (probably for their house construction), almost all interstate transactions are done by businessmen who must necessarily use these goods either for resale or for consumption for production purposes. In both cases, they will be paying VAT at the time of clearance of these goods from their godown/factory.

c. After imposition of VAT, it is cheaper for a buyer to purchase goods intra state so that he can claim input credit for VAT paid on such goods. In case of interstate purchases, the CST paid is not reversed and hence, is a complete loss or cost to the buyer. Thus, no buyer will ever make an intra-state purchase and wrongly show the transaction to be an inter-state purchase which the C form intends to prevent. Thus, c form serves no rational purpose whatsoever.

d. Issuance of C form and submission at the time of assessments are the activities area source of huge amount of corruption in commercial taxes deptt. Abolish of C form can abolish substantial corruption in one stroke.

e. Since the CST Act is a central act, the state government will have to make a representation to the Central Govt for abolish of the C form altogether, and in the meanwhile, it can consider issuing notification to dispense with its compliance within the state of MP so that immediate relief could be provided. Obviously, there is no interested party which can challenge the legality of such notification.

f. The C form is causing a huge drain of energy on the business community which should be conserved for more productive and meaningful activities that will itself provide a boost to industrial development of the state.

3) Abolition of E1 form for transit sale

a. Similarly, CST act provides for sale of goods while in transit on which no sales tax is imposed provided the original seller of the goods issues E1 form which he gets from his sales tax deptt. This is an irrational requirement because the transit sale itself means a sale of goods after they have been dispatched by the original seller but before they reach the buyer. A requirement for issuance of E1 form means that the original seller must be aware of such sale to a third party and still, invoicing not to this third party but an intermittent buyer. This is a law created fallacy which creates huge problems in practice and the E1 form results in huge drain of energy of the business community.

b.An own generated declaration by the original buyer who sold the goods in the course of transit should be sufficient. The transaction can always be verified from the Lorry Receipts. Such E1 form is causing a huge drain of energy on the business community which should be conserved for more productive and meaningful activities that will itself provide a boost to industrial development of the state.

4) Free movement of goods across borders between the states

a. Almost all states have imposed restrictions on movement of goods inter-state by imposing some waybills or road permits to check tax evasion. Tax evasion should be checked with better monitoring and intelligence and occasional surveys/raids on shops rather than a blanket restriction on the entire business activity resulting in huge corruption apart from huge wastage of transporters’ time and delays in movement of goods causing further losses to the business.

b. Abolition of the system of way bill (Form No. 49) will send a very positive signal to investors across the country as it will improve their efficiency and reduce costs.

c. For tax evasion concerns, retailers should be monitored and periodical surveys should be done to ensure adequate tax compliance.

5) Sales tax (VAT or GST as the case may be) assessments on random basis only

a. The assessment procedure is very inefficient, time consuming and a breeding ground for corruption. The deptt should be made to follow the income tax style of assessments where most returns are accepted as it is, and certain number of cases are randomly selected for detailed scrutiny. This will send a very positive signal to the investors across the country attracting them to MP

6) Judicial reforms to expedite enforcement of contractual rights

a. On ease of doing business, on the criterion of contract enforceability, India ranks 182 in a list of 183! We are already at the bottom of the world and it is high time something is done about it. Indian courts are laden with 3.5 crore cases which is hurting business community hard because they are unable to enforce their contractual rights. Situation has given rise to Jiski Lathi Uski Bhains which must be checked. This can be done in three ways,

i. One, by reducing time required for disposal of each case which could be done by reforming the judicial procedures to make it more efficient and effective. For instance, strict action against false statements in court, mandatory sharing of court fee between both the parties at the start of suit itself, decree pronouncement as well as enforcement by the same court, realistic interest rates in decrees and penal compound interest from the date of decree etc. should help reduce the couldn’t-care-less attitude of most defendants and curt time required in decree enforcement a great deal.

ii. Two, by introducing an alternative forum for redressal and making it legally mandatory. A compulsory Arbitration could be enforced and trade bodies like CII, FICCI, ASSOCHAM could be encouraged to set up an Arbitration Panel in each city on cost-chargeable basis and law could be amended to compel each commercial dispute first to be sent for arbitration before it comes to court, and

iii. Three, by increasing the availability of judicial time which could be done by number of courts and by increasing no. of working hours in the courts.

b. An efficient system of enforcement of contractual rights will boost the business prospects of the state/country.

7) Law to be amended for ensuring property rights to owners rather than tenants

a. India has to come out of reverse discrimination in its blood. Indian economy has suffered a great deal with the socialistic undercurrent in our thinking which has ensured unfair and enormous advantage to tenants of the property at the cost of owners. This has discouraged investment in real estate for renting out, and made tenants the aggressors and illegitimate but legal occupiers. It is high time such law is amended and all the rights including of evacuation of property at reasonable notice, are restored to the owners. If done, this will boost investment in real estate sector, availability of houses for all and sundry, and consequent growth in building material industry.

8) Infrastructure within the industrial areas

a. Roads within industrial areas are in pathetic condition. They need to be made perfect for creating right atmosphere and showing that the state/country really means business.

b. A few water projects have been implemented on BOT basis. More such projects should be awarded for ensuring adequate supply of water in all industrial areas. You can’t have industrial growth or anything without water, and too much of it is going into the oceans every year. India needs to learn to manage its resources well.

9) Automatic approval for setting up of captive power plants by industries and sale or deposit of surplus power generated

a. Since availability of power is a serious concern throughout India, it is imperative that automatic approval is deemed to be granted to all factories for setting up of captive power plants without any time limit or electricity duty or cess.

b. Since government is already getting revenue from sales and profits of such factories, there is no justification for any further taxes on the fuel consumed by such captive power plants, and hence, the excise/Vat collected from such fuels (diesel, coal, gas or whatever) be made eligible for input credit by all factories. This will make the power affordable and encourage factories to expand capacity and generate more revenue. A short sighted insistence of double taxation on such fuels is a long term loss to the exchequer. Sooner our policy makers realize it is better for the country.

c. Since whole India is a power deficit country, factories should be encouraged to set up captive power plants generously, and be allowed to sell their surplus power both the neighbours without using the grid of the supply companies in which case normal rate of commercial taxes could be applied, as well as to deposit the surplus power with the state power supply company to be used by the factory in future, after deducting some nominal wheeling or transmission charges. This will boost power supply scene of the states and at the same time, boost the industrialization.

10) Remove multiplicity of taxes - Merge all indirect taxes into single GST

a.There are a number of small taxes which do not generate much revenue but drain a lot of energy of the entrepreneurs, and hence, they should be merged with VAT or GST as the case may be ie, professional tax, entry tax, electricity duty, cess on power, cess on captive power, municipal taxes on the factories etc.

b. In fact, the factories should be subjected to only three taxes, One Customs duty on imports, Two, GST on domestic production and sale, and Three, Income tax, and nothing else. This system will reduce the cost of collection and free up most of the energies and productive time of the businessmen for use in more production, and hence, more revenue. If more revenue is required, the tax rate should be revised rather than imposing an additional tax or cess or duty.

c. The present idea of having 3 GSTs should be scrapped in favour of a single GST. The matter of distribution of revenue between the states and centre should be resolved in the interest of saving a huge cost of collection and saving the time of entrepreneurs. Input credit for inter-state purchases should not be a problem to any state because a state is either a producer in which case it gets tax on clearance of goods, or a consumer in which case it gets final tax on last point sale and hence, there is no situation of any state losing any tax by way of input credit for interstate purchases. There can be no input credit without a sale, and no sale without some value addition and hence, there has to be revenue for any state.

11) Positive bureaucracy, grievance cell in Ministry of Industries

a. Indian babus are officially the slowest in Asia. Entrepreneurs know they are negative and almost hostile to business as well. Each grey area and each discretion is decided against business which breeds corruption. Bureaucracy must be trained to be friendly and favourable to business.  Special “Udyog Mitra Cell” may be created directly under the charge of the Minister of Industries and all the entrepreneurs be encouraged to write their complaints to the cell giving specific details in all matters concerning any government deptt (DIC, Commercial Taxes, Power Supply Companies, Pollution Control Board, Health & Safety Deptt, Police, Local bodies etc). The cell should issue a registration number for each such grievance received and must do its utmost to resolve the same to the satisfaction of the entrepreneurs within a maximum period of 30 days.

b. All the govt deptts be instructed to ensure that the decisions taken by them relating to any entrepreneurs are not just be legally correct or pro-revenue, but are also fair to all parties concerned. Revenue is not alone public interest, and this must be realized.

c .All the govt deptts be instructed to ensure that legal action against any entrepreneur is avoided unless it is impossible to do so, and the reasons why the same could not be avoided, be recorded and produced with the very first legal action taken by such deptts against any entrepreneur in the state. Govt is the biggest litigator and mostly in vain. The moment accountability is fixed for wrong legal action on the officer concerned, most litigation will disappear.

d. The govt to make necessary changes to the service rules to ensure that the officer concerned is awarded a “mandatory punishment of one post demotion” in each case where the “Udyog Mitra Cell” concludes that the officer concerned did not act “fairly” in any matter concerning any entrepreneur in the state such that an act that is legally right or in favour of revenue is not enough. This will minimize the cases of harassment of the business community and impose some accountability on the government officers as well.

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CA Anil Garg
Category Others   Report

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