oppn parties Cashless and Above Board Benefits the Economy

News Snippets

  • Imran Khan raises nuclear war bogey again, says if Pakistan loses a conventional war, it might fight till the end with its nuclear arsenal
  • Searching for Rajeev Kumar, ex-CP, Kolkata Police, the CBI approaches state DGP to know about his whereabouts
  • Ferry overturns in the river Godavari in Andhra. 46 feared dead
  • Supreme Court to hear pleas on Jammu & Kashmir today
  • Ghulam Nabi Azad moves Supreme Court for ordering the government to allow him to visit his family in J&K
  • GST Council meeting to focus on leakages and evasions, expected to tighten processes, especially regarding input tax credit
  • Finance minister, citing figures for July 2019, says that industrial production and fixed investment is showing signs of revival
  • Amit Shah's comment on Hindi as the unifying language draws the ire of MK Stalin and Siddaramaiah. Stalin says the country is India not Hindia
  • On Hindi Diwas today, Amit Shah says use of mother language must be increased but Hindi should be adopted as the common language of the country
  • Pakistan raises white flag on LoC to claim bodies of dead soldiers
  • India beat Bangladesh by 5 runs to lift the U-19 Asia Cup
  • A three-judge bench of the Supreme Court will examine the amendments to the SC/ST act made after an apex court order that 'diluted' the provisions and which were reinstatd by the amendment
  • Delhi government decides to re-implement the odd-even system of traffic management from November 4 to 15
  • UP to discontinue law that allows the state government to pay the income tax dues of ministers
  • Anand Sharma of the Congress to replace P Chidambaram on the parliamentary committee on home affairs
Sunni Wakf Board and Nirvani Akhara write to the Supreme Court for a negotiated settlement to the Ayodhya dispute
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Cashless and Above Board Benefits the Economy

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
Cash transactions leave no trail and are the fountainhead of corruption and tax evasion. Hence, the panel of chief ministers tasked with suggesting ways to combat the cash economy and go cashless has rightly suggested taxing cash withdrawals from banks above a threshold. But the limit of Rs 50000 set by the panel is too low. Given the value of money today, Rs 100000 for individuals and Rs 200000 in a day for others would be a better threshold. The tax should be kept at 0.1% of the withdrawn amount. It can then be graded further for stronger penalty for habitual withdrawers. The tax rate could go up to 0.2% between Rs 100000 and Rs 500000 in a month for individuals and between Rs 200000 and Rs 1000000 for others. Above Rs 500000 and Rs 1000000, it can be as steep as 0.5%. Concurrently, incentives should be provided in the form of some tax relief for going cashless through digital transactions. It is a known fact that disincentives in the form of penal tax seldom work in isolation.

After the implementation of GST, there will be a huge incentive for businesses to come above board as input tax will not be available for exemption for materials sourced without bills from the parallel economy. The problem with cash transactions arise when these are not reported. GST will make sure that to avail input tax benefits and reduce costs, most businesses will source materials through legal channels and refrain from making cash payments as far as practically possible. But the government will need to expand the banking network and improve as well as expand the high speed internet network to make digital payments a success.

Further, section 138 of the NI Act will need to be recast to make it more stringent. Various tradersÂ’ bodies have been demanding that a speedy solution must be found to cheque bouncing cases that drag on for months. Unless traders are sure of a speedy redressal in case a cheque received as payment from a buyer bounces they will continue to insist on cash payments from walk-in buyers. The law ministry should apply its mind for a solution to this problem.

Apart from this, the threshold for providing PAN should be reduced to Rs 20000 from the current Rs 50000 for cash transactions. This will ensure that small payments, or even large payments broken into smaller parcels, do not escape the tax net. With most people having PAN due to its mandatory requirement in myriad transactions, reducing the threshold is now appropriate. It will ensure that people will think twice before using cash and not reporting the transaction. The motive should not be to do away with cash transactions totally but to get all cash transactions to be reported and accounted for.

Another problem that should be looked into is the reporting of cash held in hand by taxpayers. In India, the liquid capital in the books of taxpayers far exceeds the actual capital they have in hand. This is because entry operators have made income tax files of lakhs of people to use their ficticious cash balances. It was one of the main reasons why most of the outstanding currency notes were banked after demonetization. With income tax returns simplified and being filled and submitted online with no need to attach a balance sheet, the tax department does not know what an assessee holds as cash in hand. If this was known and recorded, entry operators could not have fudged accounts of lakhs of assessees to deposit lakhs of crores of demonetized currency in benami accounts. Hence, yearly reporting of cash in hand must be made compulsory in income tax returns.

It is well nigh impossible and also not desirable to do away with cash altogether. There are millions of small businesses that will not survive without cash. But if screws can be tightened to do away with large cash deals and if the smaller businesses whose turnover is good can be brought under the tax net, cash will be used only when unavoidable. When hundreds of alternative channels to receive payments will be in place and when buyers will insist on making payment through one of these, sellers will slowly convert, like the chaatwallah who is now accepting digital payments in a bid to go cashless.