India needs Next Generation Reforms in Excise Laws, Systems and Procedures to meet the standards of 21st Century
Hardeep Singh Bedi
NEW DELHI: The former Gujarat Chief Minister Narendra Modi got elected to the post of Prime Minister because he raised hopes of billions of Indians who were feeling hapless in the erstwhile Congress led United Progressive Alliance (UPA) government.
With the skyrocketing public expectations, Modi government has completed one month in office. But, unfortunately till now Team Modi has failed to give the nation an impression that “achey din” are on the way.
For, soon after assuming the power the way Modi government has administered ‘bitter pills’ to common man in the form hiking rail passenger fare & freight and petrol & diesel price has in fact left common man bewildered. He wonders whether the massive TV advertisement campaigns of Modi were farce.
However, Indians have a peculiar tendency of forgetting past easily. Therefore, the Modi government has a chance to win nation’s dwindling confidence in it by taking some bold and reformative steps in various sectors. The best time to introduce new reforms is within 30-60-90 days of any new government taking over. Thereafter, with each passing day things become difficult.
Modi government faces many challenges but every challenge also offers opportunity. With the absolute majority in the Lok Sabha, the government has all the means to introduce reforms. All it needs is willingness.
A conducive business environment is a must for any nation to become vibrant economy, which is a key to maximum problems.
Currently India ranks low in various international indices on doing business. India ranked at 60th amongst 148 economies in the Global Competitiveness Index (GCI) for 2013-14, which was a decline from 59th position out of 144 economies in 2012-13.
Foreign Investors were skeptical during the UPA regime, and Indian investors were also looking for investment opportunities overseas.
Now, the investors are watching keenly the Modi government’s moves, which will create country’s business future. The fortunate part is that India has huge potential and is not destined to remain unfortunate. All it needs is an improved business environment for investors to attract their money.
Manufacturing is an important component of the business sector. Modi government has set a goal of raising the share of manufacturing from the current level to 25% of GDP (Gross Domestic Product) by 2025.
But, India’s share of the manufacturing sector in the overall GDP currently stands at 13.8% and this share has been coming down over the last two decades.
The reasons behind India’s pathetic manufacturing scenario are: cumbersome regulatory framework; complex laws, rules, regulations and administration of Indirect taxes, particularly of Central Excise; problems of labour, infrastructure, finances, land, power; etcetera.
Advocate Dr. Prabhat Kumar, a retired IRS officer, has sent a proposal to the government for reforms in Indirect Taxes (Central Excise).
Dr Kumar, Former Commissioner of Customs & Central Excise and Ex- President of NGO- Innovative Radical Reforms Organisation, feels that if anomalies in the Central Excise system are corrected then they will pave a way towards improving the overall business climate in the country.
Batting for a new model of indirect taxes, Dr Kumar told this scribe that it was way back in 1966 a new and radical scheme was envisioned and implemented. “And, after nearly 5 decades, the model of SRP (Self Removal Procedure) has remained in operation, whereas there has been a tectonic change in the Eco-System of the manufacturing sector in India and abroad.”
“It is the highest time that a new model is evolved and implemented so that the industries running away from China on account of rising labour cost, strengthening currency (Yuan) and for various other reasons find sufficient incentive to relocate to India instead of those investors choosing Bangladesh, Vietnam or Indonesia that are trade and manufacturing-friendly destinations,” said Dr Kumar.
Citing the problems of the current systems in excise, he said that “the administration of Central Excise regime has become very difficult that stifles and chokes the manufacturing sector and drives away the manufacturers and investors, domestic and foreign”.
“Set of complex laws, complex administration and rising number of disputes in excise have created deterrence for entrepreneurs and investors setting up new manufacturing units at a time when large number of units have already been closed down due to such complexities, resulting in reduction of share of India’s manufacturing in overall GDP,” he added further.
The bureaucrat turned advocate is for complete reformation of the current Central Excise regime.
Dr Kumar’s Reformation Recipe for Central Excise has ‘seven ingredients’: evolving a new architecture beyond the current SRP System; freeing the factories from Central Excise controls altogether; no more searches, audits by the department—an alternative mechanism to be provided for controls in tune with the times; dismantling unfriendly and unresponsive administrative infrastructure in Central Excise; simplified procedure for collecting duty that escapes assessment; and right-sizing of the excise department and providing a healthy working environment to officers.
Briefing the benefits of new Central Excise system, Dr Kumar said “reforms will encourage entrepreneurs to set up units, which will create new jobs. Share of GDP of manufacturing along with economic growth will go up and officers will find a very healthy & satisfying work environment. Corruption will come down and India’s consistently low ranking of India’s bureaucracy (rated as the last in Asia) will improve.
He said these reforms will be a fillip to Prime Minister Narendra Modi’s formula of ‘Minimum Government and Maximum Governance’. 