To make it easier to do business in India, a committee led by former Sebi chairman M. Damodaran has recommended disincentivising use of civil courts in contractual disputes, weeding out unwanted regulations and proper due diligence before setting up new regulatory authorities, among others.
The report also warned against tendency of retrospective taxation. India was widely criticised for retrospective amendment of the Income Tax Act to bring the Vodafone deal under the tax net.
The committee was set up by the corporate affairs ministry due to the poor ranking of India in the World Bank ease of doing business list, where the country was positioned at 132 among 183 countries.
“Retrospective taxation has the undesirable effect of creating major uncertainties in the business environment and constituting a significant disincentive for persons wishing to do business in India,” the report said. It said that while the legal powers of a government extend to giving retrospective effect to taxation proposals, it might not pass the test of certainty and continuity. “This is a major area where improvements should be attempted sooner rather than later since business cannot take corrective action retrospectively,” said the report.
It said that it does no credit to a country of India’s size and standing that it is ranked 183 out of 184 countries in the area of contract enforcement.