Finance Minister Arun Jaitley found himself defending demonetisation yet again on Thursday, stating that invalidation of the non-deposited currency was not the only objective of demonetisation.
More formalisation of the economy, more money in the system, higher tax revenue, higher expenditure, and higher growth after the first two quarters are the positive impact of demonetisation, he wrote.
Jaitley’s defence this time came after the Opposition upped its attack on the government after the Reserve Bank of India’s annual report for 2017-18 revealed that over 99.3 per cent (₹15,31,073 crore) came back into the system after the Centre withdrew ₹500 and ₹1,000 currency notes worth ₹15,40,000 crore.
Jaitley also cited facts and figures in his latest Facebook blog post —‘Demonetisation and its impact on Tax collection and Formalisation of the Economy.’
“The larger purpose of demonetisation was to move India from a Tax Non-compliant society to a compliant society. This necessarily involved the formalisation of the economy and a blow to black money,” he said. Jaitley wrote that when cash is deposited in banks, the anonymity of the owner of the cash disappears. The deposited cash is now identified with its owner, allowing for an inquiry into whether the amount deposited is in consonance with the depositor’s income.
“Post demonetisation about 1.8 million depositors have been identified for this enquiry. Many of them are being fastened with tax and penalties. Mere deposit of cash in a bank does not lead to a presumption that it is tax-paid money,” he wrote.
Rise in tax returns
Stressing on the health of the economy, Jaitleysaid the number of Income Tax Returns went up to 6.86 crore in 2017-18 from 3.8 crore in 2013-14. In the last two years, when the impact of demonetisation and other steps is analysed, I-T returns have increased by 19 per cent and 25 per cent, which is a “phenomenal increase”. He also pointed out that the number of new returns filed post demonetisation increased in the past two years by 85.51 lakh and 1.07 crore, respectively.
Advance tax collection during the first three months of the current fiscal has increased for personal income-tax assessees by 44.1 per cent and for the corporate tax category by 17.4 per cent. Total income-tax collections went up to ₹10.02 lakh crore in 2017-18 from ₹6.38 lakh crore in 2013-14.
Jaitley said that the growth of Income Tax collections in the Pre-demonetisation two years was 6.6 per cent and 9 per cent, which rose to 15 per cent and 18 per cent during next two years post demonetisation.
Demonetisation has had an impact on not only direct taxes, but also on the indirect taxes. Jaitley wrote that number of registered assesses under GST went up to more than 1.14 crore from 66.17 lakh under previous indirect tax regime — comprising VAT (Value Added Tax in States and Central Excise at Centre). This means a growth of 72.5 per cent and also more and more people now wants to be part of the formal system.