How covid-19 is driving big reforms in ease of doing business

When finance minister Nirmala Sitharaman met business heads February to assess how the coronavirus pandemic could impact India’s industry, the immediate fear conveyed was the shortage of raw materials from China. One industry particularly vulnerable was pharmaceuticals – among the success stories of India’s manufacturing capability.

The fear of imported raw material supplies drying up has since then set off a series of steps towards a big makeover of India’s handling of cross border trade and starting this Monday, the most critical experiment in customs reforms —faceless assessment. That is, goods will be assessed by officials outside the port of import for clearance.

The idea is to transform customs into a paperless and a contactless experience for businesses, a move that will eliminate interface with officials and discretion in decision making, ensure physical distancing to combat the pandemic and fast track the clearance of goods which will reduce costs for importers.

M. Ajit Kumar, chairman of Central Board of Indirect Taxes and Customs (CBIC), earlier this week told field officials to “leave no stone unturned” in the transformation of the customs department and in rolling out and scaling up faceless assessment that will make it uniform and speedy and would benefit the trade. “Faceless assessment would be a complete departure from existing manner of customs assessment,” Kumar told officials in a communication on 8 June.

Industry executives have said the move benefit all, particularly the small businesses.

“This move will benefit businesses, especially the ones that do not have a large set up. Also, it will help in avoiding delays even if officials are not able to be physically present at workplace during the pandemic,” said Chandrakant Salunkhe, founder and president of SME Chamber of India and SME Importers Association of India (SIAI).

Cross-border trade has been a key area needing reforms flagged by the World Bank in its ease of doing business reports. In its 2020 report, India was among the top ten countries that made progress in ease of doing business including in cross border trade. The pandemic provided the momentum, with the government announcing around-the-clock clearance of goods at all custom formations on 20 February, followed by a series of steps to simplify procedures. That included setting up single window Covid helpdesk, launch of automated release of consignments all over the country from 5 March, provisional clearance of goods with preferential treatment without original certificate of origin, personal hearing through videoconferencing, a drive to clear pending refunds, and exemption of demurrage charges during the lockdown.

“The introduction of faceless assessment in Customs would significantly improve the ease of doing business, however it needs to be extended to all products and across all ports in order to achieve the required degree of uniformity and anonymity in assessments,“ said M.S. Mani, tax partner at Deloitte India.

Faceless assessment has been rolled out at Chennai and Bangalore, starting with mechanical, electrical and electronic machinery and will be scaled up across the country by end of the year.

Faceless assessment is expected to help combat corruption at customs facilities, which an industry executive, who did not wish to be named, described as a “well oiled machinery.” There is competition within sections of bureaucracy to get juicy postings at important ports, said the executive.

Faceless assessment is now increasingly becoming the norm in governance. The Income Tax department has introduced it and the ministry of corporate affairs is working on introducing it for adjudicating on Companies Act related cases.

According to the World Bank’s ‘doing business report 2020’, taxation, cross border trade and insolvency and bankruptcy have been three areas India managed to make improvements. The report ranked India at 63, an improvement from 130 in the ‘doing business report 2016.’