By Rishi Agrawal, CEO and Co Founder, Teamlease Regtech
India’s regulatory framework requires businesses to manage at least 23 central and state identities. To name a few, some corporate identifications issued by central departments are EPFO Number, ESIC Number, PTIN, IEC, FSSAI, LIN (Labour Identification Number), PAN, TAN(multiple), GSTN, CIN, Udyog Aadhar, among others. The state departments also issue the Professional Tax Number, Factory license number, Shop & Establishment Registration, Labour welfare board registration, Contract labour Principal Employer registration number, TIN among others. All of these have distinct life cycles and renewal processes. This complex ecosystem hinders businesses, particularly small and medium enterprises, from focusing on core activities and making compliance costlier. PAN 2.0 promises to consolidate these identifiers by integrating key functionalities like PAN and TAN services into a unified portal managed by the Income Tax Department. What has been amiss in creating a business-friendly environment in India is the missing single identity. With a budget allocation of Rs 1,435 crores, the government has fulfilled the industry’s long-standing demand for a Common Business Identifier (CBI). This enhanced version aims to address identity crises for businesses, creating the foundation of a robust ecosystem, streamlining processes, and reducing administrative burdens for businesses of all sizes.
Globally, countries like New Zealand, Singapore, Canada, the Philippines, and others have identified the perks of designating a single identifier for businesses that integrate seamlessly across tax, licensing, and regulatory frameworks. Adopting unified business identities has created an ever-growing startup ecosystem in these countries. India’s PAN 2.0 aspires to achieve similar cohesion by uniting multiple identifiers under a single umbrella, fostering a business-friendly environment. If observed deeply, the ability to extract compliance data across diverse and distributed data sources and build a compliance score by synthesising and analysing data for actionable insights is missing. No composite score correlates an entity’s past performance with its future risk profile—akin to making a lending decision without access to a borrower’s credit score. India’s employers require a singular identity, analogous to Aadhaar for citizens. The proposed “PAN 2.0” aims to resolve this identity gap by serving as a unique enterprise identifier. In its initial phase, the government should adopt PAN 2.0 as a common business identifier across all departments of the union government. Simultaneously, it should collaborate with state governments to integrate the multitude of identifiers issued at the state level into PAN 2.0. Financial institutions, employers, and regulatory bodies will benefit from real-time data accessibility, expediting background checks and onboarding processes. This move towards a unified identifier will align with the government’s vision of enhancing the ease of business in India.
For citizens, the introduction a PAN Data Vault, akin to a citizen DigiLocker is one of the standout features of PAN 2.0. It is a secure system that stores PAN (primary account number) data to protect it and ensure compliance with cybersecurity standards. This would create a ‘single source of truth’, reducing redundancies, inaccuracies, and data security lapses. Since its creation nearly five decades ago, PAN has been the backbone of preventing tax evasion and expanding the tax base in the country. From once used for linking documents regarding taxes, loans, and investments, it has become a great tool to detect financial discrepancies and adhere to ever-expanding regulations. This modern version of the financial enabler will create a hassle-free experience for taxpayers by bringing all processes under one platform and ensuring the security of their sensitive data. Notably, this is just an upgrade to the existing mechanism, making applying for PAN 2.0 voluntary for citizens.
The implications of PAN 2.0 run deeper than streamlining tax administration, setting the stage for other such innovations, like an enterprise DigiLocker for digitally storing government-issued documents and automated compliance systems to reduce paperwork further and redundancies and push this economy towards becoming digitally empowered. For instance, applications for factory permissions currently require thousands of self-attested and notarised documents spanning over 40 different government departments. Envision a scenario where entrepreneurs can apply to establish a new factory digitally by referencing their business identifier and granting access to their enterprise DigiLocker for document verification. Furthermore, adopting a standardised and automated National Open Compliance Grid (NOCG), enabling API-based filings for all compliance obligations, can lead to a paperless, cashless, and presence-less economy.
The introduction of PAN 2.0 marks an era of being identified through ‘a common source of truth’ for businesses. The consolidation of identification, documentation, and transactions will be a booster dose for the growth of companies in India. A better-integrated PAN 2.0 framework for will give some more clarity to the identity of businesses in India. When India embraces PAN 2.0 at different levels of governance, it will take another step towards realising its dream of becoming a $10 trillion economy that is digitally and financially inclusive.
