In a major push by the Government to improve ease of doing business in India, by March-end you will be able to start a business in India in six days, compared to the current 26 days. The number of procedures will also be halved from the current 12 to only six.
Currently there are 12 procedures in Delhi that a company needs to follow to incorporate a company. If you are in Mumbai, the number goes up to 14 as you have to register for Profession Tax and receive inspection and obtain Shops and Establishment registration certificate.
Currently New Zealand, with only half a day needed, has the best track record in the number of days it takes to start a company. In Singapore it takes about 2.5 days to start a company. In the US it takes about 5.6 days and in the United Kingdom it takes about 4.5 days. When this change is implemented, India will take a big leap in terms of matching these countries. Out of the 190 countries in the list, India Ranks 130 overall in the World Bank Ease of Doing Business Report and rank.
As per World Bank it takes 26 days to start a business in India. The Government’s target is to bring it down to 6 days by the end of March.
Taking the first step, for the first time, PAN and TAN allotment has been integrated with the process of company incorporation. This happened last week of January ’17. Earlier a company had to be incorporated, and then it went to CBDT for PAN number followed by TAN number. This process took anywhere from one week to 10 days. Now, this entire process is being done simultaneously. The Ministry of Corporate Affairs (MCA) has also rolled out the SPICe or Form INC 32 from January 1 this year, where where in a single application a company can reserve the name, incorporate the company and apply for allotment of DIN.
The proposed 6 procedures for starting a business would now be:
1. Incorporate a company using SPICe Form.
2. Obtain PAN and TAN though a single integrated form.
3. Register with EPFO and ESIC. (If Applicable)
4. Open a Bank account.
5. Register with VAT and Profession Tax; online and real time.
6. Register with Shops and Establishment Act.
According to World Bank Ease of Doing Business report in the 107 economies covered by both Doing Business and the World Bank’s Entrepreneurship Database, an estimated 3.1 million limited liability companies were newly registered in 2012 alone. Data shows that if these economies followed best practice, their local entrepreneurs would have saved 45.4 million days spent in satisfying bureaucratic requirements. This valuable time could have been better employed focusing on firm growth, productive activities & innovation.
In 2016, India made starting a business easier by eliminating the minimum capital requirement and the need to obtain a certificate to commence business operations. In 2015, the country made starting a business easier by considerably reducing the registration fees, but also made it more difficult by introducing a requirement to file a declaration before the commencement of business operations. In 2011 India eased business formation by establishing an online VAT registration system and replacing the physical stmap previously required with an online version.