Industry Pitches For GST-Style Reforms In Land, Labour

Recognising these challenges, the Confederation of Indian Industry (CII) has urged the Central and state governments to consider reforms based on the GST Council model.

CII argues that the same mechanism of consultation, coordination, and consensus-building that helped facilitate complex tax reforms through the GST Council should also be extended to land, labour, construction, utility connections, and local approvals.

The primary objective of this demand is not merely to reduce the number of approvals but to transform the regulatory relationship between the government and industry - from a punitive approach towards a trust-based governance system.

CII Director General Chandrajit Banerjee has said, “The GST Council has demonstrated that difficult reforms can be achieved through cooperative federalism, dialogue, and consensus between the Centre and states. The same approach is needed for India's next phase of economic reforms.”

Greater coordination among the Centre, states, and local authorities is essential to streamline land allocation, construction approvals, environmental and fire clearances, labour registrations, and utility connections. Fragmented administration and sequential approvals continue to increase costs and delay industrial projects.

“The Centre and state governments should work towards developing common standards of administrative efficiency, interoperable digital systems, time-bound approvals, risk-based inspections and transparent service-delivery mechanisms. This does not require reducing the autonomy of state governments. Rather, the objective is to establish a common framework that enables states to compete by offering better governance, faster services, and a more investment-friendly environment,” he said.

An industrial executive from Gujarat told The Secretariat that CII's recommendations are not merely complaints from the industry but indicate the next phase of reforms required in India's manufacturing and investment policy. 

Land Reforms

According to CII, land is one of the most critical factors of production for the growth of India's manufacturing sector. However, the process of acquiring industrial land in India has multiple stages.

Investors face challenges not only in identifying suitable land but also in establishing clear ownership rights, ensuring that the land is free from legal disputes, complying with zoning regulations, securing access to infrastructure such as electricity and water, and obtaining permission for industrial use.

Industrial land acquisition generally takes 18 to 24 months. If disputes arise over ownership rights, compensation or other legal matters, the process can take more than three years. Similarly, obtaining Change in Land Use (CLU) permission can take anywhere between six and 18 months.

This means that a considerable amount of time can pass between the announcement of an investment and the commencement of actual production. During this period, investors' capital remains blocked, interest costs increase, and the financial viability of projects may be affected.

Labour Reforms

Simplification of India's labour laws has been a subject of discussion for several years. The Central government has consolidated 29 Central labour laws into four Labour Codes. All four Codes came into effect on 21 November 2025.

However, consolidation of legislation is only the beginning of reform. The real concern for industries is how easily and uniformly these provisions are implemented across different states.

A company operating in multiple locations may still have to deal with different labour departments, registration procedures, returns, inspections, and licensing requirements.

CII has called for better integration of data and processes across Employees’ Provident Fund Organisation (EPFO), Employees State Insurance Corporation (ESIC), Shram Suvidha, and other labour-related portals.

Its recommendations include integration of labour-related digital platforms and databases; risk-based inspections instead of routine and repetitive inspections; a corrective approach rather than punitive action for common procedural errors; unified digital system for registrations, licences, returns and grievance redressal; the objective is to reduce compliance costs, eliminate duplication, and create a more predictable regulatory environment for businesses operating across multiple states.

Local Approvals

Setting up an industrial unit or a large project in India requires more than approvals from the state government.

Depending on the nature of the project, investors must also obtain permissions from local authorities, municipal corporations, municipalities, development authorities, fire departments, and utility agencies responsible for electricity and water supply.

Key requirements include building plan approval, development permission, fire safety NOC, water and electricity connections, drainage and sewerage permission, trade and factory-related permissions, occupancy, and completion certificates

The problem arises when every department has its own application process, documentation requirements, timelines, and verification procedures.

If approval from one department is dependent on clearance from another, the overall project timeline can be significantly extended.

CII has recommended bringing approvals from all relevant departments under a single digital platform, prescribing clear timelines for each permission and enabling applicants to track the status of their applications online.

It has also suggested considering a system of deemed approval, subject to appropriate legal safeguards, for specified permissions where public safety, environmental protection, and other sensitive interests are not at risk and the prescribed statutory timeline has expired.

Challenges Before Government

Extending the GST Council model to other areas, however, will not be straightforward.

Unlike GST, land, labour, and local approvals involve multiple layers of constitutional, statutory, and administrative responsibilities.

Land, labour, and local approvals are not easily brought under a single institutional framework; labour legislation involves distinct responsibilities of the Central and state governments; urban local bodies operate under different laws, regulations, and administrative structures; areas such as environmental clearances and fire safety involve specialised responsibilities, and public interest considerations, economic and social conditions vary across states, and fixing accountability for delays in approvals could become a major administrative challenge.

Therefore, any proposed institutional mechanism would need to respect the existing constitutional distribution of powers while ensuring greater coordination and standardisation.

Uniformity Versus Decentralisation

Economist and political commentator Hemantkumar Shah told The Secretariat that the idea of a uniform business system in India remains a distant reality under the existing constitutional framework.

The fundamental objective of the 73rd and 74th Constitutional Amendments is to decentralise powers, thereby safeguarding the rights and autonomy of states and local self-government institutions.

Shah said, “The Seventh Schedule of the Constitution clearly specifies which taxes are to be levied by the Centre and which by the states. States, in turn, can authorise local bodies to collect taxes. In such circumstances, demanding uniformity across the country is far-fetched.”

He pointed out that even the NITI Aayog, established in 2015, emphasises the principle of ‘Cooperative Federalism’. Given India's vast diversity, creating a uniform business ecosystem across the country is neither desirable nor practical.

Why Reforms Are Needed

GST reforms helped reduce tax-related uncertainty and certain procedural difficulties for businesses.

However, if an investor takes two years to acquire land, faces delays in construction approvals, and has to follow different labour compliance procedures in every state, tax reforms alone cannot improve manufacturing competitiveness. 

In economics, land, labour and capital are recognised as the fundamental factors of production. Their availability, cost and efficiency play a crucial role in determining the competitiveness of the manufacturing sector.

Misuse Of Power

Shailesh Patwari, Founder and Director of Nexus Infratech Pvt Ltd, told The Secretariat, "The powers vested in GST officials are often misused, leading to corruption. At times, misinterpretation of the law results in non-compliance, and genuine business owners may face harassment."

Patwari, who is also a former President of the Gujarat Chamber of Commerce and Industry (GCCI), cautioned against granting unchecked powers to the authorities.

"Businesses that deliberately indulge in financial fraud, tax evasion, or other wrongdoing constitute a very small minority. Honest businesses should not be penalised for the wrongdoings of a few," he remarked.