"GST and demonetisation are resulting in increasing tax compliance and squeezing quantum of cash in the economy," Finance Minister Arun Jaitley said.
Union Finance Minister in his keynote Berkeley India Conference address via video conferencing has said that there is public support for the reforms being undertaken by the Modi government. Also, Jaitley explained how the Modi government’s initiatives like Swachh Bharat, Goods and Services Tax (GST) and demonetisation are having the desired impact. “GST and demonetisation are resulting in increasing tax compliance and squeezing quantum of cash in the economy,” Finance Minister Arun Jaitley said explaining the two big initiatives. “I do hope that India is able to retain its growth rate once again and live up to the aspirations of its people because we must not forget that we not only have a large population to service, we have a very young population to service,” Jaitley said, as per a report in news agency PTI.
The Union Finance Minister is scheduled to arrive on nearly a week-long visit to the US on Monday to interact with the US corporate world in New York and Boston and attend the annual meeting of International Monetary Fund and World Bank in Washington DC.
In the next one or two decades, if India has to take a challenge for moving into a higher economic group country, “we have to grow at a much faster pace,” Jaitley added.
While demonetisation and GST are having the desired impact in terms of tax compliances and squeezing the quantum of cash in the economy, the minister added that Swachh Bharat campaign has brought to fore the importance of sanitation and cleanliness. Observing that sizable progress is being made in terms of sanitation and cleanliness, he said for the first time in Indian history this has become a centre stage agenda and is moving forward. “It’s a movement that has become far beyond a governmental program. It a mass movement,” Jaitley said.
“Before demonetisation, Indian normal was to live with a high cash economy, not paying taxes, you buy a property, you transact partly in cash, and in business you maintain two sets of accounts,” he said. “How can a country, which aims to be the fastest growing major economy in the world, which aspires to grow from a developing to a developed economy, continue with the normal of this type,” he asked.
“And therefore, you need to shake the system in order to reduce the quantum of cash in India and therefore obviously to make it a more tax complaint society,” he observed adding that cash itself involves several challenges and it leads to corruption and several other problems.
In the immediate aftermath of demonetisation, Jaitley said there has been sharp reduction in insurgent and terror activities in states like Jammu & Kashmir and Chhattisgarh. The funding of the terror itself has gotten squeezed, he told the Berkeley students. “You are having terrorist incidents (now), but the fact that you were finding 5,000-10,000 stone throwers being provided with money by the terrorist organisations, why is it that in the last eight-10 months it has not happened?” he asked.
Moving on to GST, the minister said this has resulted in the creation of a national tax structure. “In the three months, you have all the checkpoints in states disappeared, you have clear flow of goods and services which has started all over the country,” he said, adding that companies are sharing information about the distributors and retailers. Slowly the whole chain is becoming, he said, adding that today many more people have registered themselves. Acknowledging that the problem with them is related to compliance burden, Jaitley said the GST Council has noted these challenges and is taking steps to address them. “But in terms of cash collection, the whole process going online, the process of coming down, one thing I can tell you the tendency of some to have the whole chain operate in cash will suffer a setback,” Jaitley said.
“I think in GST Council we have succeeded in creating India’s first federal institution,” he said.