Since 2014, 103 Bills have been passed in the Lok Sabha. We discuss the top 10 Bills of the 103 passed by Parliament during the past 30 months which have a strong bearing on the economy. Given the enormous potential impact of each of these Bills, the structural reform effort of the Narendra Modi government can hardly be denied.
First, the 122nd amendment of the Constitution to introduce the goods and services tax (GST). An ideal GST regime will create a harmonised system of taxation subsuming all indirect taxes. Though the provisions of this Bill do not fully conform to an ideal GST regime, it is a step in the right direction to systematise Indian tax regime for smoother functioning of the economy.
Second, the Insolvency and Bankruptcy Code Bill, 2015, was passed in June 2016. The Code creates time-bound processes for insolvency resolution of companies and individuals. If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors. Time-bound insolvency resolution is a good step, but it will require establishment of several new entities. Also, given the pendency and disposal rate of debt recovery tribunals (DRTs), their current capacity may be inadequate to take up the additional role. The Code creates an Insolvency and Bankruptcy Fund, but it doesn’t specify the manner in which the fund will be used.
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Third, the Benami Transactions (Prohibition) (Amendment) Bill, 2015, seeks to amend the Benami Transactions Act, 1988. The Act prohibits benami transactions and provides for confiscating benami properties. It defines benami as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person. The Bill amends the definition to add other transactions which qualify as benami, such as property transactions where (i) the transaction is made in a fictitious name, (ii) the owner is not aware of or denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable. It is a great step towards unmasking those who hold black money. If the I-T department works transparently, this will go a long way in cleaning the system.
Fourth, the Employee’s Compensation (Amendment) Bill, 2016, amends the Employee’s Compensation Act, 1923. The Act provides payment of compensation to employees and their dependents in case of injury by industrial accidents, including occupational diseases. This will reduce litigation in cases of disputes arising over compensation to workers. This is the second key labour legislation passed by the Lok Sabha, the first being the amendment to the Child Labour Act and reflects the government’s commitment to labour reforms. This Bill will benefit the organised workforce, and passing of it shows the government is pro-labour.
Fifth, the Companies (Amendment) Bill, 2014, introduces certain amendments to related-party transactions, fraud reporting by auditors, making common seal optional, and jurisdiction of special courts to try certain offences, etc. The Statement of Objects and Reasons of the Bill state that this is to ensure ease of business. The Bill removes the requirement of a minimum paid-up share capital amount for private and public companies. It deletes the requirement of a common seal. These steps will not only address the difficulties faced by stakeholders, but also improve the ease of doing business in the country.
Sixth, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, 2016, intends to provide for targeted delivery of subsidies and services to individuals residing in India by assigning them unique identity numbers, called Aadhaar. The government has been offering many kinds of subsidies and monetary payments to the economically weak. But as these payments trickle down from the Centre, via a long chain of intermediaries to the final beneficiary, a lot is lost in corruption, leakages and bribes. The government is keen to reduce these leakages by crediting subsidies directly into the bank accounts through its JAM (Jan-Dhan-Aadhaar-Mobile) initiative.
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Seventh, the Industries (Development and Regulation) Amendment Bill, 2015, amends the Industries (Development and Regulation) Act, 1951. It amends the schedule to exclude production of alcohol for potable purposes from the ambit of the Act. It seeks to bring industries engaged in the manufacture of potable alcohol under the exclusive control of the states. The Union government will still be responsible for formulating policy and regulating foreign collaboration for all products of fermentation industries, including industrial and potable alcohol.
Eighth, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015, amends the principal Act passed in 2013. The Bill enables the government to exempt five categories of projects from the requirements of (i) social impact assessment, (ii) restrictions on acquisition of multi-cropped land, and (iii) consent for private projects and PPP projects. The five categories of projects are (i) defence, (ii) rural infrastructure, (iii) affordable housing, (iv) industrial corridors, and (v) infrastructure including PPPs where the government owns the land.
Ninth, The Factories (Amendment) Bill, 2016, amends the Factories Act, 1948. The Act regulates the safety, health and welfare of factory workers. The amendment is related to provisions of overtime hours. It also gives rule-making powers pertaining to exemptions to workers to both, the central and state governments.
Last but not the least, in a step towards delivering on the BJP’s poll promise of unearthing black money stashed abroad, the government introduced the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, in Parliament. Now, tax on all foreign income will have to be paid at the flat rate of 30% without any exemption, deduction, and set off or carry forward losses that the I-T Act permits. There is enhanced punishment of jail between 3-10 years for wilful evasion of tax on foreign income along with a penalty equal to three times the amount of tax evaded or 90% of the undisclosed income or the value of asset.
There is a limited compliance window offer. Failure to file returns of foreign income or assets will attract a penalty of R10 lakh. The Bill empowers the Centre to enter into agreements with other countries for exchange of information, recovery of tax and avoidance of double taxation. It proposes to amend the Prevention of Money Laundering Act, 2002. Most important, the Bill has safeguards to ensure innocent are not harassed by the department.
Modi government’s consistency in attacking the black economy is reflected in the top 10 bills passed. The passing of Bills and the creation of the law will also improve India’s position in the World Bank’s Doing Business ranking. We hope that the implementation of the bills will be as thoughtful and rigorous as the formation of the bill has been. These bills should help in significantly moving India towards the vision of the government. These will also lead to more investment interest in India from global credit investors as there will be more certainty to the process in the event of stress.
Rajiv Kumar is founding director and Palakh Jain is senior fellow, Pahle India Foundation.
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