On the second anniversary of demonetisation, Finance Minister Arun Jaitley on Thursday once again emphasised that it was not confiscation of currency, but getting it into formal system was the broad objective. Over 86 lakh new income-tax filer were added this year alone.

On November 8, 2016, Prime Minister Narendra Modi had announced banning currency notes of ₹ 500 and ₹ 1,000. After verification and reconciliation, the total value of the ₹ 500 and ₹,1000 as on November 8, 2016, the day before note ban came into effect, was ₹15,417.93 lakh crore. The total value of such notes returned from circulation was ₹15,310.73 lakh crore. After that, the move has been criticised heavily and the Opposition termed the move as a failure.

However, Jaitley felt otherwise. In a blog, he used the word ‘the misconceived argument’ for all such criticisms. “An ill-informed criticism of demonetisation is that almost the entire cash money got deposited in the banks. Confiscation of currency was not an objective of demonetisation. Getting it into the formal economy and making the holders pay tax was the broader objective. The system required to be shaken in order to make India move from cash to digital transactions. This would obviously have an impact on higher tax revenue and a higher tax base,” he wrote.

Direct taxes

He said that direct tax collections (till October 31), rose 20.2 per cent and more specifically corporate tax grew 19.5 per cent. “Two years prior to demonetisation, direct tax collections have increased 6.6 per cent and 9 per cent, respectively. In the next two years, post demonetisation, the increase was 14.6 per cent (part of the year before the impact of demonetisation in 2016-17) and an increase of 18 per cent in the year 2017-18,’’ he said.

Similarly, in 2017-18, 6.86 crore tax returns were filed, an increase of 25 per cent over the previous year. This year, as on October 31, already 5.99 crore returns were filed, an increase of 54.33 per cent compared to the previous year till this date. New tax filers added this year stood at 86.35 lakh.

He mentioned that in May, 2014, when the present Government was elected the total number of I-T return filers was 3.8 crore. In the first four years of this Government, it has increased to 6.86 crore. “By the time the first five years of this Government is over, we will be close to doubling the assessee base,” he hoped.

Indirect taxes

The minister said that formalisation of economy has led to tax payer base increase from 6.4 million in the pre-GST regime to 12 million in the post-GST regime. The actual consumption of goods and services being recorded as part of the tax net has now increased. This has given a buoyancy to indirect tax growth. This has benefited both the Centre and the States.

Every State, post GST, is getting a mandatory 14 per cent increase in taxation each year. The fact that assessees have to now declare their business turnover not only has an impact on indirect tax calculation, but also ensures that income-tax arising out of them is disclosed in tax assessments. In 2014-15, the indirect tax to GDP ratio was 4.4 per cent. Post-GST it has climbed up by at least 1 percentage point to 5.4 per cent.

“Despite an annual income tax relief of Rs 97,000 crore given to smaller tax payers and a Rs 80,000 crore relief given to GST assesses, tax collections have gone up. Rates of taxes, both direct and indirect, have been reduced, but tax collections have gone up. The tax base has been expanded. GST rates on 334 commodities, which attracted 31 per cent tax pre-GST, have witnessed a tax reduction,” he said.

Digitisation

According to the Minister, the Unified Payment Interface (UPI) was launched in 2016 involving real time payments between two sets of mobile holders. Its transactions have grown from Rs 50 crore in October 2016 to Rs 59,800 crore in September 2018. Bharat Interface for Money (BHIM) is an app developed by NPCI for quick payment transactions using UPI. It is currently used by 1.25 crore people.

The value of BHIM transactions has gone up from Rs 2 crore in September 2016 to Rs 7,060 crore in September 2018. The share of BHIM transactions in overall UPI transactions is at about 48 per cent in June 2017. RUPAY Card is used both at the Point of Sale (PoS) and for e-commerce. Its transactions have increased from Rs 800 crore before demonetisation to Rs 5,730 crore in September 2018 for PoS and from Rs 300 crore to Rs 2,700 crore in e-commerce.

“Today Visa and Mastercard are losing market share in India to indigenously developed payment system of UPI and RUPAY Card whose share have reached 65% of the payments done through debit and credit cards,” Jaitley said.

For the people

He said that the Government used increased resources for better infrastructure creation, social sector and rural India.

“How else could we visualise villages being connected by road, electricity in every home, 92 per cent coverage for rural sanitation, a successful Awas Yojana, cooking gas connection in 8 crore poor homes. Ten crore families are covered under Ayushman Bharat, Rs. 1,62,000 crore is being spent on subsidised food, 50 per cent increase in MSP for farmers and a successful crop insurance scheme. It is the formalisation of the economy which has led to 13 crore entrepreneurs getting Mudra loans. The Seventh Pay Commission was implemented within weeks and the OROP was finally implemented,” he said, while adding that more formalisation to result in more revenue, more resources for the poor, better Infrastructure, and a better quality of life for citizens.

Related Topics
comment COMMENT NOW