Budget 2018: Modi government’s Union Budget will be presented on February 1. Finance Minister Arun Jaitley will present the financial budget 2018 in Parliament. Budget 2018 India will be crucial for the Modi government as this would be last before the 2019 Lok Sabha Elections. The BJP-led NDA government’s India budget is likely to focus on an array of issues- income tax exemption, agriculture etc. Black money is a crucial issue and Prime Minister Narendra Modi from time to time has stressed on the need to eradicate the menace from India’s economy. There are broadly two types of measures one would like to see in Union Budget 2018 with regard to black money. These are preventive measures and remedial measures.
Preventive measures will consist of attacking the root causes, incentivising people to ‘transact in white’ and remove all perverse incentives for tax evasion. Incentivise taxpayers to be honest by giving them a free mediclaim and critical illness cover linked to the average of taxes paid by them in past five years- Such a measure will go a long way to incentivise a culture of honest tax compliance. Modi government can look into this issue in Budget 2018.
Hassle-free speedy loans by banks for MSMEs based on GST returns o wean them away from local lenders operating in cash –.The pre-GST era saw many small and medium enterprises avoid borrowing from banks for business as banks’ lending is based on whether borrower can offer collateral security rather than borrowers’ estimated cash flow. Also banks insist on ITRs and these small traders have to run from pillar to post to get their loans sanctioned. So, many small traders borrowed in cash from local lenders and bought and sold in cash to keep their earnings off the books and repaid in cash to local lenders. Those who had black money like corrupt politicians, corrupt bureaucrats and big traders used to park their funds at high rates of interest with these local lenders who used to then lend at even higher rates to small traders.
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GST returns filed contain authentic data which give fair idea to banks about the cash flow. This will enable MSMEs to make online application for loans for business purposes along with GSTRs and ITRs and loans can be speedily sanctioned to them by banks. Ease of borrowing from banks will hit the businesses of local lenders who act as conduit for black money by lending in cash and accepting repayments in cash. It is hoped that, in his Budget 2018 Speech, the Finance Minister will announce a hassle-free cash-flow based lending system for MSMEs based on their GST returns data
Make GST a Great Shopping Time by allowing cashback to buyer of 50% of GST paid on cashless purchases- GST can be made a ‘Great Shopping Time’ for consumers by incentivising cashless purchases. In his Union Budget speech, the Finance Minister should announce a cashback of 50% of GST paid by a buyer on cashless purchases made by him. The cashback may be credited by Government to buyer’s account may be in a month or two. The consumer deserves this incentive as when he pays by cashless means, he is in a way co-operating with Govt to curb tax evasion by traders. This ensures that traders disclose full turnover for GST and income-tax purposes. This measure will boost consumer sentiments , increase businesses for trade and also boost tax collections through much larger volume of sales and lower tax evasion.
In Budget 2018, the Modi government can impose a limit on cash holdings beyond which it will be mandatory for person holding it to online report it to Income-Tax Department-If cash holding exceeds certain limit (say Rs.15 Lakhs) at any time during a day, it should be made mandatory to report the same online to Income-Tax Department through Apps/website. The online report should contain PAN, Aadhar(if available), amount held and contain an optional field for source and allow optional attachments if any like ledger page of cash book. If reporting not done, impose penalty and also require insurers not to honour insurance claims.
Remedial measures -Track down and Crackdown on Benami properties
The Benami Transactions (Prohibition) Act ,1988 was amended and enlarged from a 9 sections Act to a 72 sections Act by the Benami Transactions (Prohibition)Amendment Act,2016 and renamed as “The Prohibition of Benami Property Transactions Act,1988” . The amendments came into force with effect from 01.11.2016. ‘The word benami is a Persian compound word, made up of “be” which means without and “nam” which means name. It means literally without name . ‘Benami transaction’ denotes a transaction effected by a person(‘beneficial owner’) without using his own name, but in the name of another(‘benamidar’) who holds the property for the immediate or deferred benefit of the beneficial owner. The term also covers transaction or arrangement made or carried out in a fictitious name , a transaction or arrangement where owner of property denies knowledge or is not aware of such ownership and a transaction or arrangement where person providing consideration is not traceable or fictitious. Benami Transactions are usually undertaken to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors
Section 53 of the Benami Act provides that where any person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the following shall be guilty of the offence of benami transaction: beneficial owner, benamidar and any other person who abets or induces any person to enter into benami transaction. Where any person is found guilty as above, he shall be punishable with rigorous imprisonment for a term not less than one year but which may extend to 7 years and shall also be liable to fine which may extend to 25% of the fair market value of the property.
No person, being a benamidar shall re-transfer the benami property held by him to the beneficial owner or any other person acting on his behalf [Section 6(1)]. Any property, which is the subject matter of benami transaction, shall be liable to be confiscated by the Central Government. [Section 5] Section 5 of the Act provides for confiscation of benami property. “Confiscation” in its ordinary sense, means property taken by the Crown by way of penalty. -Confiscation results in change of ownership and property vesting in the Government. Confiscation of property is by way of penalty.
Ahead of Union Budget a question rises whether benami property is liable to be confiscated when no prosecutable offence under section 53 is made out? Present two-tier adjudication proceedings of first adjudication as benami and then holding confiscation hearing makes it appear as though confiscation will not be done in every case property is adjudged as benami.Section 27 of the Benami Act be amended to do away with this two-tier proceedings and require Adjudicating Authority to pass adjudication-cum-confiscation order once it is established that property is benami property.
During demonetisation, one saw the rich deposit banned notes in the accounts of poor on the understanding that it will be repaid in new notes later. These deposits will clearly be benami property.The Prime Minister in one of his speeches told the poor not to return the money to the rich beneficial owner. What the PM said is perfectly in accordance with section 6 which prohibits benamidar from re-transferring benami property back to beneficial owner. However question arises. If the poor account holder refuses to co-operate and re-transfer, will he get amnesty from prosecution under section 53? To give such amnesty to a benamidar who co-operates with Govt , an amendment be made to section 53 to provide that a benamidar who refuses to re-transfer to beneficial owner and co-operates with Government shall not be liable to prosecution. Will the whole or any part of the amount confiscated will be returned to the poor accountholder/benamidar as reward? The Central Govt may make Rules or Scheme in terns of section 28(3) as to how benami property is to be disposed of. Will the Union Budget unveil any plan as to how the poor benamidar accountholder be rewarded if he refuses to re-transfer it to the rich beneficial owner and intimates the authority?
Article by Mr Srinivasan Anand G, Senior Consultant, Taxmann