On Saturday, the Finance Minister Arun Jaitley said that the note ban and Goods and Services Tax (GST) will make it hard to have cash transactions, which will benefit in increasing the tax base as well. The minister also said that his government has made many laws to keep a check for overseas black money and also with domestic black money holders and squeezing the shell companies as well. He added that the country had reunited to an Indian normal – an enormous amount of tax noncompliance and an enormous amount of the transaction, which had been done outside the system.
“There was almost helplessness in trying to deal with the situation. Every year through the Finance Bill we would announce some changes which at best had a marginal impact. I think the lasting impact of those marginal changes was not very significant. And therefore, steps had to be taken in order to make a very significant impact,” the minister said. Jaitley also said that these steps will have a “great long term impact” and a “substantial ethical rationale” following it. “The net impact of the demonetization exercise coupled with the GST exercise, which is going to make the generation of cash a lot more difficult, will certainly lead to greater compliance, greater digitization. And the first signs of greater digitization, expansion of the tax base of direct and indirect taxes are already visible,” the finance minister added.
Jaitley was speaking at the Delhi Economics Conclave organized by the Finance Ministry, where he said that the very first major step taken by the government, which shook the old same school system, a stern action was taken against those who hid their money in the foreign countries. The minister revealed that one easy way of subversion has always been with the shell companies, which are made by the multilayering of companies. The minister said that “This had almost become standard operating procedure and this was not only used by businesses but was used to round trip corruption money by politicians, by civil servants”. “In additional to developmental challenges, including our ability to spend more on infrastructure, large investment in rural areas in education and healthcare, digitization and cash are two important subjects to be discussed, since these areas had been overlooked, which leads to a large amount of tax noncompliance, illegal transactions and created a situation of helplessness,” explained Jaitley.
The minister added that the government is also serious to raise the decision of the benami property law in obtaining these assets by the state is going to a big restriction in the future and the revenue department has already started implementing it. Jaitley said, “One easy way of avoiding taxes was the benami route. However, once the penal penalty was introduced, defaulters were informed of the dire consequences of the malpractice, thus creating a significant impact on those undertaking cash transactions outside of the country illegally. The sooner this business of routing this money through the shell companies does collapse, I think the better it is going to be for the formal economy for this country.” Talking about the amended benami property law, the minister said that “ending shiver down the spine” of those people who conservatively used this tactic of round tripping of tax evaded or corruption money and making all ways to bring it back into the system.
Coming to the India’s biggest tax reform since independence, Goods and Services Tax (GST), rolled out on July 1, is expected to give a heightened to the GDP growth and also benefit in tax evasion as all transactions in the value chain would be recorded digitally. On November 8, 2016, the government took the decision of banning the 500 and 1000 rupee notes, and also received more than 15 lakh crore worth of the old currencies from the pocket of our citizens and intended to bulldoze the black money holders. The Indian government took many decisions to promote the digital transaction following the demonetization.