Why India's Rules Hamper Business
India's current business regulations create heavy compliance costs and risks across many sectors. These rules are a major hurdle, especially for micro, small, and medium enterprises (MSMEs) in heavy industries. The PHD Chamber of Commerce and Industry (PHDCCI) has proposed several changes to remove these hurdles. They argue that current regulations raise operating expenses without adding real value and are actively hurting India's industry competitiveness and its ability to grow manufacturing exports. PHDCCI suggests moving to simpler, digital, risk-based rules to truly make it easier to do business.
Costly Paperwork and Redundant Rules
Mandatory annual corporate filings, like MGT-7 and AOC-4, often require companies to submit overlapping information. This repetition increases compliance costs and the risk of penalties without adding significant regulatory value. Many MSMEs also face mandatory tax audits because income thresholds are low, creating a disproportionate financial and administrative burden. Furthermore, having both Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) makes reconciliation and administration complex, taking resources away from core business activities. Many other competitive economies simplify these processes with single systems and higher audit thresholds to help SMEs, unlike the current difficulties faced by Indian businesses.
GST Issues and Financial Market Hurdles
Under the Goods and Services Tax (GST), obtaining Input Tax Credit (ITC) often depends on whether the supplier has complied with regulations. This penalizes buyers if their suppliers fail to meet obligations. This situation creates uncertainty and administrative strain, disrupting supply chains and cash flow for businesses. Other concerns involve financial markets, such as high "haircuts" (reductions in value) on government securities, limits on the number of CSGL accounts, and unclear price band rules. These issues collectively increase risk for fixed-income investors and can indirectly raise capital costs for industries relying on these markets.
PHDCCI's Solutions for Simpler Business
PHDCCI's proposals include practical changes. They suggest creating one combined annual filing that integrates multiple corporate submissions, making the process simpler, especially for MSMEs. The chamber also recommends raising tax audit thresholds to between ₹5 crore and ₹10 crore and combining overlapping TCS and TDS rules for simpler compliance. For GST, the proposal is to unlink ITC eligibility from supplier actions, making vendors directly responsible for their defaults. In financial markets, they propose standardizing CSGL account rules, adjusting haircut policies, and improving transparency in credit limit changes to create a more predictable environment.
Boosting Exports Through Easier Rules
PHDCCI President Rajeev Juneja stressed that simplifying rules, especially for MSMEs, with digital and risk-based systems is crucial for easing business operations. He stated that a stable, predictable regulatory environment is a strategic necessity, not just an administrative fix. Implementing these changes is expected to boost industry competitiveness and drive sustained growth in India's manufacturing exports. The current regulatory friction is seen as a key limit on India's export potential, affecting competitiveness in global markets. Addressing this is vital for meeting national economic goals.