India's ranking in terms of "Ease of doing business" index has gone up from 130 to 100. The Indian government claims success of Demonetization and GST. But, in fact, both these polices were never taken into account while computing this index.
India's rating has improved because Indian government
- Simplified the process of starting new business, terminating existing insolvent business and getting loans.
- Simplified the process of getting construction permits, enforcing existing contracts and simplifying corporate income tax.
- Taken steps to protect smaller shareholders.
- Digitization of Employee Provident Fund.
Demonetization has failed. The rich don't keep their black money in cash. They keep their black money in real estate, Gold and Dollars. So Demonetization has had almost zero impact on black money.
GST overall has good intentions, but it has multiple problems e.g.
- Small business people find the paperwork extensive. They will have to shut down or do business in cash only. The limit for tax exemption should be raised from 20 lakhs per annum within state to 5 crores within and inter-state per annum.
- GST rates are too high. In India, GST is on-average 18%. So a person pays about 30% income tax when he earns money and he will pay 18% tax when he spends his income. This means taxation is about 48% in India. In Singapore, GST is about 7% and income tax is less than 20% for most people. So most people pay less than 27% of their income to government.
- GST procedure is too complex. Most countries have a flat GST. India has different rates for different products e.g. what should be GST on chocolate ice-cream? The GST on Chocolate is different from GST on milk. So is chocolate ice-cream a chocolate product or a milk product?
- Asking business to file GST returns every month is too cumbersome. In Singapore, businesses file GST returns every quarter. Why should Indians file GST returns every month?
Indian ranking will not improve because of Demonetization or GST in current form.
