Higher tax mop-up points to suc­cess of note ban: Jaitley

Slams ‘mis­con­ceived crit­i­cism’ of move, claims ob­jec­tive was to for­malise econ­omy

The Hindu Business Line - - FRONT PAGE -

On the sec­ond an­niver­sary of de­mon­eti­sa­tion, Fi­nance Min­is­ter Arun Jaitley once again em­pha­sised that the ex­er­cise was not in­tended for con­fis­ca­tion of cur­rency, but to get it into the for­mal sys­tem. And one mea­sure of its suc­cess was that over 86 lakh new in­come-tax fil­ers were added this year alone, he noted.

On Novem­ber 8, 2016, Prime Min­is­ter Naren­dra Modi had an­nounced the with­drawal of ₹500 and ₹1,000 cur­rency notes from cir­cu­la­tion. The to­tal value of th­ese notes as on Novem­ber 8, 2016, the day be­fore the note ban, was ₹15,417.93 lakh crore. The to­tal value of such notes re­turned to the trea­sury was ₹15,310.73 lakh crore. The note ban has been widely crit­i­cised and the Op­po­si­tion has branded the move a fail­ure.

How­ever, in a blog post on Thurs­day, Jaitley dis­missed this crit­i­cism as a “mis­con­ceived” ar­gu­ment. “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,” he wrote.

He said that di­rect tax col­lec­tions (till Oc­to­ber 31, 2018) rose 20.2 per cent; more specif­i­cally, cor­po­rate tax col­lec­tions grew 19.5 per cent. “Two years prior to de­mon­eti­sa­tion, di­rect tax col­lec­tions 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 2017-18.’’

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 have been filed, 54.33 per cent more than in the pre­vi­ous year.

In May 2014, the num­ber of I-T re­turn fil­ers was 3.8 crore. In the four years since, it has in­creased to 6.86 crore. By next year, he hoped, “we will be close to dou­bling the as­sessee base.”

Rise in tax­payer base

Jaitley said the for­mal­i­sa­tion of the econ­omy had led to an in­crease in tax­payer base from 6.4 mil­lion in the pre-GST regime to 12 mil­lion af­ter. The con­sump­tion of goods and ser­vices be­ing recorded as part of the tax net has in­creased. This has given buoy­ancy to in­di­rect tax growth, ben­e­fit­ing both the Cen­tre and the States, he added.

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 2014-15, the in­di­rect tax to GDP ra­tio was 4.4 per cent. Post-GST, it has climbed up to 5.4 per cent.

“De­spite an an­nual in­come tax re­lief of ₹97,000 crore given to smaller tax pay­ers and an ₹80,000crore re­lief given to GST as­sessees, 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,” he said.

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