Economy formalised, tax base widened: Arun Jaitley on demonetisation
Finance minister Arun Jaitley wrote that the positive impacts of demonetisation included the formalisation of economy, more money in the system, higher tax revenue, higher expenditure and higher growth after the first two quarters.Updated: Aug 30, 2018 23:49 IST
The invalidation of currency that didn’t come back into the system was “certainly not” the only object of demonetisation, finance minister Arun Jaitley said on Thursday, adding that the larger purpose of the note ban exercise was to make India a tax-compliant society.
This necessarily involved the formalisation of the economy and a blow to black money, he said in a post on the social media, a day after the Reserve Bank of India said in a report that almost all banknotes banned two years ago had been deposited. The Opposition has used that report to criticise the government, asking it what the objective of demonetisation was if all the money came back into the system.
Jaitley wrote that the positive impacts of demonetisation included the formalisation of economy, more money in the system, higher tax revenue, higher expenditure and higher growth after the first two quarters.
RBI said in its annual report that Rs 15.31 lakh crore of the Rs 15.41 lakh crore in circulation in Rs 500 and Rs 1000 notes that were invalidated on 8 November 2016, had returned to the banking system. Critics of demonetisation suggested that the exercise failed in achieving one of its principal targets of cracking down on black money.
In his post, Jaitley argued that the anonymity about the owner of cash disappears when money is deposited in banks.
“The deposited cash is now identified with its owner giving rise to an inquiry, whether the amount deposited is in consonance with the depositor’s income,” he said.
Jaitley said about 1.8 million depositors have been identified for this enquiry after demonetisation, adding, “Many of them are being fastened with Tax and Penalties.”
He said mere deposit of cash in a bank does not lead to a presumption that it is tax-paid money.
Jaitley said the number of income tax returns filed stood at 68 million in 2017-18 as against just 38 million in March 2014. “In the last two years, when the impact of demonetisation and other steps is analysed, the Income Tax returns have increased by 19% and 25%. This is a phenomenal increase.”
The number of new returns filed after demonetisation increased in the past two years by 8.55 million and 10.7 million, he said.
Income tax collections grew at a rate of 6.6% and 9% in the two years before demonetisation while it increased by 15% and 18% in the next two years. “The same trend is visible in the third year.”
Jaitley said advance tax in the first quarter of 2018-19 increased by 44.1% for personal Income tax assesses and 17.4% in the corporate tax category. “The Income Tax collections have increased from the 2013-14 figure of Rs 6.38 lakh crores to the 2017-18 figure of Rs 10.02 Lakh crores.”
The minister also said the Goods and Services Tax (GST) was implemented in the post-demonetisation period and the number of registered assesses increased by 72.5% in the first year. The original 6.61 million assesses have increased to 11.4 million, he said.
Opposition parties, especially the Congress, have criticised Prime Minister Narendra Modi’s shock announcement in November 2016 to ban Rs 1000 and old Rs 500 notes. After the RBI report, Congress leader Manish Tewari reiterated that demonetisation missed its targets of curbing terror financing, eliminating black money and eradicating fake currency.
“It wiped out the MSME sector, cottage industry and crores of daily wage-earners lost their jobs. The Indian economy lost 1.5 per cent in terms,” he alleged on Wednesday.
First Published: Aug 30, 2018 23:32 IST