Ahead of trade deal, UK firms urge India to expose ‘disappointing’ red tape

The UK India Business Council says fixing legal, tax and regulatory complexities is as important as a trade deal to boost economic ties

The UK India Business Council says fixing legal, tax and regulatory complexities is as important as a trade deal to boost economic ties

Legal and regulatory hurdles in India remain a source of “frustration” for investors looking to set up or expand operations in India, even as “regular delays” in land acquisition and customs clearances remain problematic , UK India Business Council (UKIBC) has been conveyed to the Government of India.

The council has urged India to take a “comprehensive view” of the priority sector lending norms for foreign banks operating in India and seek equitable tax treatment, while protecting intellectual property (IP) as a deterrent. Mark the increasing cases of sale of counterfeit products through e-commerce platforms in India. ) master.

The council, which is working to soon have a free trade agreement (FTA) between India and the UK, has said that ease of doing business is as important as a trade agreement to increase trade and investment flows. Its recent submissions to the government, based on input from British firms operating in the country, include a laundry list of procedural, taxation and other areas that need intervention.

“Legal and regulatory hurdles remain a frustration according to businesses. Duplication of regulation in which two sets of regulations are administered by two different organs of government on the same issue was cited as a major issue,” UKIBC has reported.

Such duplication leads to delays and costs, and is most common in the areas of the Concurrent List of the Constitution, such as labour, the environment, food and personal care. “The unnecessary, repeated rules are a dampener for investment,” it said, adding that there are many gray areas in compliance, whether in tax or telecom.

UKIBC Executive Chairman Richard Heald said, “In short, our recommendations are to reduce bureaucracy, simplify legal and regulatory complexities and taxation, develop a world-class IP and infrastructure environment, and ensure investor protection. are about.” Investment.

Noting that the lack of enforcement of IP rights is problematic and can stifle innovation, UK firms have cited examples of counterfeit goods in circulation, With more examples coming in online commerce, which has assumed more imports after the pandemic. This has exacerbated the problem of “breakdown of intellectual rights”, the council said.

UK firms have also called for reforms in land acquisition processes, particularly from the public sector, and insisted that land use conversion is a lengthy process that hampers business plans.

“Businesses also struggle to expand structures in India due to complex compliance requirements, especially structural compliance. Together, reforms to simplify greenfield and brownfield acquisitions and development allow businesses more stores, factories and other facilities. will help in opening up, thus enabling them to expand rapidly and provide gainful employment,” UKIBC said.

While lower corporate tax rates, including a 15% levy for new manufacturing units, encourage investment, UKIBC states that there is a “significant disparity” between the effective corporate tax rates for foreign firms that use the “branch model”, On which 43.68% tax has been imposed. , compared to domestic peers who are taxed at 25.17%.

“This serves as a major deterrent to international businesses using this model, such as banks,” the council said, adding that the elimination of the dividend distribution tax is part of the problem.

“Providing tax parity will lead to greater investment and growth in the domestic market and economy… In addition, the obligation to compromise on fair and equitable treatment of foreign investments appears in the vast majority of international investment agreements, in which tax treatment is a In part, it said such factors help determine whether investments should be made in India or competing countries such as Vietnam or China.

While any foreign bank with more than 20 branches gets the same priority sector lending (PSL) targets as domestic banks, UK institutions have said this is ‘rather restrictive’ as they bring different expertise to the table. This “directly limits” their ability to contribute to sustainable financing for sectors such as infrastructure that require long-term and affordable funding.

“In some cases, foreign banks are able to serve and fully participate in cross-border financing, trade finance and sustainable financing, for example, supporting the PSL targets for agriculture. Agriculture and allied sectors Domestic knowledge, are slightly beyond their reach in terms of capabilities and the geographical reach required for rural areas of India,” the council suggested including sovereign green bonds and infrastructure financing in such lending norms.