Lok Sabha Question No. 3097 (UNSTARRED), answered on 2018-08-06
Subject: Incentives under EoDB
Ministry: COMMERCE AND INDUSTRY
Asked by: N.K. PREMACHANDRAN

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY

## DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

UNSTARRED QUESTION NO. 3097. TO BE ANSWERED ON MONDAY, THE 6 TH  AUGUST,  2018.

## INCENTIVES UNDER EODB

## 3097.  SHRI N.K. PREMACHANDRAN:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) the  details  regarding  the  initiatives  taken  by  the  Government  to  relax  the conditions for Ease of Doing Business for corporates;
- (b) the change in laws and concession given by the Government during the last four years for ease of doing business for the corporates in the country;
- (c) the details of the action taken by the Government for relaxing the conditions for issuing construction permits to corporates;
- (d) the  details  of  the  concession  declared  by  Government  during  the  last  four years for the electricity tariff and connection to the corporates;
- (e) the details of the action taken by the Government during the last four years for relaxing the provision for registering the property for corporates; and
- (f) the details of the action taken by the Government during the last four years for making corporate investor protection?

## ANSWER

## वाणिज् य एवं उद्योग मंत्रालय में राज् यमंत्री (श्री सी.आर. चौधरी) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI C.R. CHAUDHARY)

- (a) & (b): A  number  of  initiatives  have  been  taken  by  Government  of  India  to improve the overall business regulatory environment in the country. Steps taken to facilitate ease of doing business are placed in Annexure-I.
- (c): Following initiatives have been taken to facilitating issuance of construction permits, but not limited to corporates-
- i. For issuing construction permits,  an  Online Building  Permission System  (OBPS)  has  been implemented in Delhi and  Mumbai,

integrating all internal and external agencies for granting No Objection Certificates (NOCs) for construction activities.

- ii. Ministry  of  Housing  and  Urban  Affairs  has  released  Model  Building Bye Laws (MBBL), 2016, which contains a Chapter on Streamlining the Building Plan approval in a time bound manner using online tools. The MBBL-2016 have been shared with all the States/Union Territories (UTs) for adoption. Further, detailed Guidelines on Online Building Permission System (OBPS) have been issued to all States/UTs.
- iii. 16  States/UTs  have  stipulated  construction  permits  to  be  provided within 45 days:-
- a.  Building plan approval in 30 days of applying
- b.  Plinth level inspection is done in 7 days of intimation
- c. Final completion/occupancy certificate is provided within 8 days of applying
- iv. 12 States/UTs have developed online single window for building plan approval which allows users to upload building plans, apply for NOCs from  various  agencies,  pay  fee  online  and  download  certificates/ approvals/ NOCs.
7. (d): Regulatory reforms undertaken by Central Electricity Authority (CEA) and regulators are as under, but not limited to corporates-
- i. CEA regulations amended for allowing installation of transformers up-to 500 KVA on double pole structure.
- ii. CEA notification to waive off electrical inspector approval for 11 KV installations carried out by DISCOMs and allowing self-certification by DISCOMs engineers in such cases
- iii. Changed  Tariff  Regulation  in  Delhi  to  allow  Low  Tension  (LT) connection up-to 150 KVA and rationalized LT Tariff for taking LT connection up-to 150 KVA. Mumbai has also allowed upto 140 KVA connections to be LT connections. This has resulted in reduction of number of procedures (External  works  of  meter  board  conducted by customer's electrical contractor) and associated costs of Distribution  infrastructure  which  add  up  to  the  cost  of  obtaining electricity connection by Commercial Consumers.
- iv. Change in Supply code in Delhi to facilitate reduction in cost and time for new connection.
- v. Rationalization of service connection and security deposit costs to commercial  consumers  under  LT  connections  have  resulted  in  a reduction of costs to be paid for by such consumers for obtaining electricity connections.
13. (e): Following  steps  have  been  taken  to  facilitate  registering  of  property  but not limited to corporates:-
- i. Department  of  Land  Resources  is  running  Digital  India  Land Records Modernization Programme (DILRMP) and providing funds to the States/UTs for Digitization of Cadastral Maps and Computerization  of  Registration  in  addition  to  Survey/Resurvey,

Computerization  of  Land  Records  and  establishment  of  Modern Record  Rooms.  The  main  objective  is  to  develop  a  modern comprehensive and transparent land records management system in the country to minimize scope of land/property disputes, enhanced  transparency  in  the  land  records  maintenance  system. So  far  31  States/UTs  have  completed  the  computerization  of registration.

- ii. In Mumbai, deeds/title records have been digitized and have been made available online.
- iii. In  Mumbai  and  Delhi,  maps  have  been  digitized  and  made available online.
- iv. Grievance  Redressal  Systems  have  been  implemented  for  Subregistrar office (Mumbai and Delhi) and cadastral mapping agency (Delhi).
- v. In  Delhi,  property  transaction  statistics  have  been made available online.
5. (f): Following initiatives have been taken for protecting corporate investors:-
- i. In order to protect the corporate investors, the approval of shareholders  in  a  general  meeting  has  been  made  mandatory effective  from  30.03.2017  for  contracts  or  arrangements  with  a related  party  for  (i)  sale,  purchase  or  supply  of  any  goods  or materials, directly or through appointment of agent, exceeding ten per cent of turnover of the company or Rupees one hundred crore whichever is lower, (ii) selling or otherwise disposing of or buying property  of  any  kind,  directly  or  through  appointment  of  agent, exceeding ten per cent of net worth of the company or Rupees one hundred crore,  whichever is  lower,  (iii)  leasing  of  property  of  any kind exceeding ten per cent of the net worth of the company or ten per cent of turnover of the company or Rupees one hundred crore, whichever  is  lower,  (iv)  availing  or  rendering  of  any  services, directly or through appointment of agent, exceeding ten per cent of the  turnover  of  the  company  or  Rupees  fifty  crore,  whichever  is lower.
- ii. Following  amendments  have  been  made  to  the  Companies  Act, 2013 to improve Ease of Doing Business:
- a. Section  188  (1)  of  the  Act  read  along  with  Rule  15  of  the Companies (Meetings of Board & its Powers) Rules,  2014 ('Rules') provides that a special resolution is required by a company to  enter  into  any  contract  or  arrangement  with  a related party. In order to solve the problems faced by large stakeholders  who  are  related  parties,  the  Amendment  Act has replaced the requirement of passing a 'special resolution'  with  'ordinary  resolution'  for  approval  of  related party transactions by non-related shareholders.
- b.  Explanation to Rule 15 of the Rules further provides that for the  purpose  of  entering  into  a  transaction  between  wholly owned subsidiary and a holding company, a special resolution passed by the holding company shall be
10. sufficient. By way of this amendment, related party transactions between holding companies and wholly owned subsidiaries  have  been  exempt  from  the  requirement  of approval of non-related shareholders if the accounts of such a  subsidiary  are  consolidated  with  such  holding  company and placed before the shareholders at the general meeting for approval.
- c. As  per  The  amendment  Act,  2017,  under  section  188,  the requirement related to restriction on voting by related party in the general meeting shall not apply to a company in which ninety  per  cent  or  more  members  in  numbers  are relatives  of  promoters  or  related  parties.  Non-ratification  of transaction  shall  be  voidable  at  the  option  of  the  Board or shareholders,  as  the  case  may  be.  Earlier  it  was  only voidable at the option of the Board.
- d.  Section  177  of  the  Act  allows  the  audit  committee  of  a company to approve and review related party transactions of the  company.  The  Amendment  Act  now  empowers  such audit  committees  to  give  collective  approvals  for  related party  transactions  on  an  annual  basis.  This  amendment aligns the Act with the SEBI policy and further increases the ease of doing business for companies.
- e.  As  per  the  Amendment  Act,  2017,  under  section  177, Instead of every listed company, every listed public company and such other class of Companies shall constitute an  audit  committee.  Transactions  with  Related  party  other than those prescribed under section 188, if not approved by Audit  committee,  will  require  the  approval  of  Board  of Directors.
- f. In case any transaction involving any amount not exceeding one crore rupees is entered into by a director or officer of the company without obtaining the approval of the Audit Committee  and  it  is  not  ratified  by  the  Audit  Committee within  three  months  from  the  date  of  the  transaction,  such transaction  shall  be  voidable  at  the  option  of  the  Audit Committee and if the transaction is with the related party to any  director  or  is  authorized  by  any  other  director,  the director concerned shall indemnify the company against any loss incurred by it.
- g.  Approval  of  audit  committee  with  respect  to  transactions between a holding company and its wholly owned subsidiary company will only be required, if the transactions falls under section 188.
16. ********

## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) & (b)  OF LOK SABHA UNSTARRED QUESTION NO. 3097 FOR ANSWER ON 06.08.2018.

## World Bank's Doing Business Report (DBR)

Some of the major indicator wise reforms undertaken by the Government towards easing the business environment in the country are as under:

## (a) Starting A Business:

Reforms  accepted  in  DBR  2018: India  made  starting  a  business  faster  by introducing a single form SPICe (Simplified Proforma for Incorporating Company  electronically)  by  merging  five different applications  i.e.  Name reservation,  Company  incorporation,  Director  Identification  Number    (DIN), Permanent Account Number (PAN) and the Tax Deduction/Collection Account Number (TAN),  and  by  improving  the  online  application  system.  This  reform applies to both Delhi and Mumbai.

## Reforms implemented for DBR 2019 :

-  Discontinued the INC-1 eform and launched a new and simplified web based  service  i.e.  R.U.N.  (Reserve  Unique  Name)  on  26th  January, 2018. This has also removed the requirement to use a Digital Signature Certificate (DSC) during name registration.
-  Applications  for  obtaining  Director  Identification  Number  (DIN)  for  first time directors in a new company now have to be mandatorily submitted through the SPICe eform.
-  Incorporation fees  has  been  eliminated for  Companies  with  authorized capital up to INR 10 lakh.
-  Applications required for PAN and TAN have been completely integrated into SPICe form eliminating need of submitting online a  separate form. Additionally, PAN  and TAN  are mentioned in the Certificate of Incorporation (CoI) which is now a sufficient proof for PAN and TAN.
-  Registration for EPFO & ESIC is available on Shram Suvidha Portal .
-  Registrations under Mumbai Shops & Establishments Act are processed in real time and without any physical inspection.

## (b) Dealing with Construction Permits:

Reforms accepted in DBR 2018: India made dealing with construction permits less cumbersome by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai. The online system has streamlined the process of obtaining a building permit, thereby  reducing  the  number  of  procedures  and  time  required  to  obtain  a building permit in India.

## Reforms implemented for DBR 2019 :

-  All approvals of the construction lifecycle (i.e. from building plan approval till issuance of completion-cum-occupancy certificate) are issued online.
-  Introduction  of  provision  of  decennial  professional  liability  insurance  in Delhi and Mumbai.
-  Delhi  and  Mumbai  have  introduced  provision  of  joint  inspection  for issuance of Occupancy cum completion certificate.

## (c) Getting Electricity:

## Reforms implemented for DBR 2019 :

-  In  Delhi,  service  line  charges  have  been  capped  to  INR  25,000/-  in electrified areas for Low Tension loads up to 150 KW.
-  In Delhi, DERC regulations mandate that the electrical connection process must be completed within 15 days of the application's acceptance.
-  In  Mumbai,  Reliance  Infrastructure  Limited  requires  the  applicant  to  pay the cost of electricity connection along with the first bill.

## (d) Registering Property

## Reforms implemented for DBR 2019:

-  In Mumbai, deeds/title records have been digitized and have been made available online.
-  In  Mumbai  and  Delhi,  maps  have  been  digitized  and  made  available online.
-  Grievance  Redressal  Systems  have  been  implemented  for  Sub-registrar office (Mumbai and Delhi) and cadastral mapping agency (Delhi).
-  In Delhi, property transaction statistics have been made available online.

## (e) Getting Credit:

Reforms  accepted  in  DBR  2018: India  strengthened  access  to  credit  by amending  the  rules  on  priority  of  secured  creditors  outside  reorganization proceedings and by adopting a new law on insolvency that provides a time limit and clear grounds for relief to the automatic stay for secured creditors during reorganization proceedings. This reform applies to both Delhi and Mumbai.

Reforms implemented for DBR 2019 : Notified and started the implementation of Section 20A of the SARFAESI Act with the objective of integration of all state and central registries with the CERSAI registry.

## (f) Protecting Minority Investors:

Reforms  accepted  in  DBR  2018: India strengthened minority investor protections by increasing the remedies  available in cases  of prejudicial transactions between interested parties. This reform applies to both Delhi and Mumbai.

## (g) Paying Taxes:

Reforms accepted in DBR 2018: India made paying taxes easier by making payment  of  Employee  Provident  Fund  (EPF)  mandatory  electronically  and introducing a set of administrative measures easing compliance with corporate income tax. This reform applies to both Delhi and Mumbai.

## Reforms implemented for DBR 2019 :

-  The implementation of GST has subsumed all indirect taxes including (i) Service  Tax  (ii)  Value  Added  Tax  (ii)  Central  Sales  Tax  and  (iv)  Excise Duty. Unification of these taxes will reduce the cascading effect of taxes and make taxes paid on inputs creditable to a higher percentage. Also, it is expected to reduce the time spent on filing and returns.
-  Corporate income tax has been reduced from 30% to 25% for companies with a turnover up to INR 250 crores.
-  Under the GST, Integrated Goods & Service Tax (IGST) is fully allowed as credit as against Central Sales Tax levied on which no input tax credit was allowable in erstwhile VAT regime, thereby reducing effective tax rate.

## (h) Trading Across Borders:

Reforms accepted in DBR 2018: India reduced import border compliance time in  Mumbai  by  improving  infrastructure  at  the  Nhava  Sheva  Port.  Export  and import border compliance cost were also reduced in both Delhi and Mumbai by eliminating merchant overtime fees and through the increased use of electronic and mobile platforms.

## Reforms implemented for DBR 2019 :

-  To  reduce  the  time  taken  for  border  compliance  time,  facility  of  filing advance bill of entry (import declaration) is provided by customs.
-  Enhanced facilitation through Risk Management System (Facilitated Bill of Entry)  by  simplification  of  Risk  Management  System  inspection  process resulting in reduced time taken for clearance.
-  Direct Port Delivery for import and Direct Port Entry for export is available at  Jawarlal  Nehru  Port  Trust  (JNPT)  to  allow  clearance  and  shipping  of cargo directly from port premises, thus reducing the overall dwell time for both import and export.
-  Promotion  of  Authorized  Economic  Operator  (AEO)  programme:  AEO programme  seeks  to  provide  tangible  benefits  in  the  form  of  faster Customs  clearances  and  simplified  Customs  procedures  to  business entities.
-  Reduction  in  paper  documentation  and  physical  copies  of  EXIM  related documents with the help of e-Sanchit; e-Sanchit, an online application on ICEGATE portal that allows a trader to submit all supporting documents for clearance of consignments electronically with digital signatures.
-  Government of India has mandated the use of e-Payment, e-Invoice and e-Delivery order by all stakeholders in maritime trade from 2nd of April.
-  Customs has implemented Electronic Sealing for Containers by exporters under self-sealing procedure; leading to faster export process.
-  Infrastructure strengthening: In order to handle the rising number of cargo at  JNPT,  JNPT  has  added  15  e-RTGCs  (Rubber  Tyre  Gantry  Cars)  to improve the operational efficiency.
-  A fifth container terminal has been inaugurated at JNPT in February, 2018 which has added a capacity of 24 million TEUS (Twenty Feet Equivalent Units) at JNPT.

## (i) Enforcing Contracts:

Reforms  accepted  in  DBR  2018: India  made  enforcing  contracts  easier  by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts. This  reform  applies  to  both  Delhi and Mumbai.

Reforms  implemented  for  DBR  2019 :    Implemented  case  management system for judges and lawyers in Delhi district court & Mumbai city civil court for speedier resolution of commercial cases.

## (j) Resolving Insolvency:

Reforms accepted in DBR 2018: India  made  resolving  insolvency  easier  by adopting a new insolvency and bankruptcy code that introduced a reorganization  procedure  for  corporate  debtors  and  facilitated  continuation  of the  debtor's  business  during  insolvency  proceedings.  This  reform  applies  to both Delhi and Mumbai.

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