Online, but far from easy

To start any business in India, one needs a registration certificate (RC) from the sales tax department of the state concerned. Last year, the national capital made this an online process. This was expected to aid the process of doing business easy and simple.

But despite the move by the Department of Trade and Taxes, Delhi, to bring sales tax registration to an online platform, problems persist for those starting new businesses.

A senior department official claims that the process has become fully automated only since May this year.

What is the whole process?

To get an RC, a company has to first apply for Permanent Account Number (PAN) card verification. Company officials say typically, this takes two-three days. After getting the PAN card verified, a taxpayer identification number (TIN) is generated, following the submission of required documents online.

When does the pain start?

After securing a TIN, a company has to wait for a verification inspector to come and inspect it. According to norms, the inspector has to complete the verification within 15 days of the date when the TIN is issued. However, there have been instances in which companies have been left waiting for six months. "I have 12-13 clients who are waiting for the inspector for more than four months," said a business consultant who assists many small enterprises. Officials of various Delhi-based companies Business Standard spoke to confirmed this.

However, a senior officer from the Department of Trade and Taxes, Delhi, said, "In Rohini (in the northwest of Delhi) alone, we are approving 3,500-3,700 companies a month. Obviously, the total number of applications is higher… Also, I don't think the delay in getting an RC is, in any way, affecting the operations of any company," he added.

Why is RC important?

An RC is important for fledgling businesses because for most, this is the only document proving authenticity. A sole proprietor firm cannot open a bank account without this. The certificate is all the more vital for any company seeking to become a seller on any e-commerce website. "An e-commerce company might allow you to sell your product on its website using the TIN number, but they expect you to submit your RC sooner or later," says Paras Mehra, chartered accountant, www.quickcompany.in.

"We are trying to get a payment gateway for our website. But to check the authenticity of the company, they need some certificate," said an executve from an e-commerce start-up awaiting a visit by a verification inspector.

Bribes abound

"The bribe rate of a verification inspector is Rs 3,000-10,000. First, they check how desperate the person is; then, they decide their rate," says an official of a company in east Delhi.

A Delhi-based vendor selling goods on Snapdeal, Amazon, etc, said, "The verification officer asked me for Rs 10,000. When I refused to pay such a steep amount, he threatened to cancel my registration for some minor spelling mistake in the address."

After a verification officer gives a positive report to his supervising officer, the RC is now sent online. Many say in this step, too, a bribe (starting at Rs 2,000) has to be paid to the supervising officer. The government official quoted earlier, however, said, "We are not aware of any incident in which bribes have been sought."

Discretionary powers

Business consultants say the fact that officials of Department of Trade and Taxes, Delhi, hold the ultimate discretionary power negates any benefit one expects in e-governance.

Officials in the department, however, say its powers aren't what they used to be. "Moreover, the number of bogus applications is about 50 per cent in some parts of Delhi," said the department official.

Considering Delhi's experiment with e-governance, it is clear the government has to bring its officials in sync with its aim of bringing about transparency and a pro-business environment.