Tax-paying in India takes up more than 250 hours, compared to 140 hours in New Zealand, 138 hours in China, and 191 hours in Indonesia, according to the country’s performance when measured against both its peers and the best-in-class countries.

Due to numerous government initiatives, India rose in the Ease of Doing Business (EoDB) rankings from 100th in 2017 to 63rd in 2020. The government must continue to make similar efforts to raise India’s EoDB position. The ease of doing business in India has always been one of the main goals in recent Union Budgets. GST was adopted with this goal in mind, and efforts are currently being made to focus on impersonal assessments, appeals, and digitalization in addition to making every effort to offer single window clearance.

The World Bank evaluates 190 economies annually and ranks them according to how simple it is to conduct business in each nation using the following ten criteria:

Establishing a business, registering real estate, dealing with building permits, obtaining electricity, obtaining credit, paying taxes, trading internationally, protecting minority investors, enforcing contracts, and resolving insolvency are all covered.
The World Bank takes into account a number of variables while assessing the parameter of Paying Taxes, including time, total tax and contribution rates, the number of payments required for a local medium-sized company to pay all taxes, the effectiveness of post-filing operations, etc. The World Bank has recommended the following excellent practises:

(i) Providing online payment and filing
(ii) To keep things simple, only use one tax base.
(iii)self-assessment as a viable method of tax collection
(iv) Risk-based audits for efficient tax administration
Based on these variables, India’s performance when compared to both its peers and the best-in-class shows that paying taxes in India consumes more time than in New Zealand, China, and Indonesia, where it takes 140 hours, 138 hours, and 138 hours, respectively. These factors give an indication of the room for improvement.

India has changed since the corporation tax was reduced from 30% to 25% two years ago, but here are some more recommendations for enhancing the country’s tax administration to raise its EoDB rankings:

  1. The appeals process for CIT(A):
    To instill confidence and foster trust among taxpayers, tax assessments and appeals must be finalised within a reasonable time frame. The majority of Department actions are currently subject to statutory time limits, but the Income-tax Act does not impose any stringent deadlines on the first appellate authority’s ability to issue an appeal. According to the CBDT’s Central Action Plan, this resulted in over 5 lakh cases being outstanding at the CIT(A) level as of February 28, 2022. Therefore, it is advised to set a stringent deadline for the CIT’s decision on appeals (A). Although the deployment of Joint Commissioners for the purpose of handling appeals was announced in Budget 2023, it would still take on average more than three years to resolve the pending appeals. In addition to this government move, the Income-tax Act’s section 250 must also be amended to require the CIT(A) to issue the order within certain deadlines.
  2. Rectifications, recovery of demands, and powers to continue recovery: It’s not uncommon to have demands raised as a result of errors in the provision of set-offs, such as failure to award TDS credit or MAT credit or any clerical or mathematical inaccuracy. Taxpayers may submit a correction petition in certain circumstances. To get credit for taxes or TDS, especially for combined organisations, however, often requires years of follow-up, which leaves unrecoverable demands unpaid in the IT Portal for a long time. Despite the requirement in the Income Tax Act that rectification orders be issued within six months after the application, this rule is rarely followed. The passing of rectification orders typically takes two to three years due to the centralization of many of these processes under the control of the CPC. Additionally, Section 220 of the Income Tax Act allows the Assessing Officers to decide whether to suspend the demand recovery even in these situations where the rectifications are still being processed. Nonetheless, the Assessing Officers frequently insist on collecting 20% of such requests. While there are several judicial precedents that support staying demand recovery while rectification petitions are pending, only a select few people actually walk on the Court’s door appealing for a stay to receive such relief! Thus, it is proposed that section 220 of the Act be changed to make the stay of demand automatic/directory in situations where rectification applications are pending.
  3. Once taxpayers are thoroughly inspected by the Faceless regime, it is time to stop reassessments:
    Reopening assessments by Indian tax authorities that have been closed for a number of years has historically been a death sentence for taxpayers under the Act. India was one of the first nations to implement faceless assessments, in which a Review Unit, a Technical Unit, and a Verification Unit support an Assessment Unit (AU). Consider whether routine review provisions are still necessary, at least in circumstances where a thorough examination has already been done. Additionally, it should be noted that four separate commissioners are already involved in the assessment-making process because each of the AU, TU, RU, and VU is led by an additional or joint commissioner in accordance with section 144B’s directive (4). Reassessment proceedings should only be used in extreme circumstances and should not be viewed as a second chance to change an assessment. It is recommended that the Government take into account a little longer window for finalising the evaluation in an anonymous manner without leaving the door open for it to be reopened rather than constantly adjusting the assessment timetables. The community of investors and taxpayers will become more confident as a result.

It would be interesting to highlight that in the US, the IRS seeks to audit tax returns as soon as possible after they are submitted, keeping up with global trends. The IRS may consider returns submitted within the last three years in an audit, despite the fact that they have been extremely infrequent. When a specific return is chosen for audit, the IRS sends a document request for information along with specific questions concerning the return. This is comparable to India’s scrutinising evaluations. Although the IRS audit is the first assessment to take place in the US, there doesn’t seem to be any thought given to redoing a previously completed assessment. This is also a common practise that many other nations have embraced.

  1. Faceless regime and administrative barriers: The government adopted the Faceless regime for both appeals and assessments in an effort to increase openness and eliminate administrative barriers, albeit it is difficult to apply the Faceless regime in its true meaning. The taxpayers benefit from the electronic system’s ability to reduce compliance time. But frequently, problems with using electronic filing and payment systems can arise for taxpayers, either as a result of bugs and faults in the system or a lack of taxpayer training and guidance. To address these difficulties, it is advised that India establish a strong grievance redressal cell.

One important factor in boosting investor confidence and enhancing the ease of doing business in India is tax policy and administration. Simply said, the Government has been implementing important changes to raise the ratings, and continued success on this front will hasten India’s ranking in the top 50 nations for ease of doing business in the years to come.