The demonetisation process is a fundamental shift in how the economy works and is aimed at cleaning up the economy and expanding the formal sector.
Government has issued instructions to tax authorities so that there is no ‘tax terrorism’ for businesses going formal post demonetisation, Power Minister Piyush Goyal said.
The demonetisation process is a fundamental shift in how the economy works and is aimed at cleaning up the economy and expanding the formal sector. As such, the government has issued instructions to tax authorities that there will be no tax terrorism by Income Tax Department for businesses going formal, Goyal said in an interactive session organised by CII here.
Explaining that demonetisation of high denomination notes had become necessary due to doubling of such notes in circulation over 2004-2010, the minister said that it has been estimated that Rs 6 lakh crore worth of the total cash issued of approximately Rs 17 lakh crore was not circulating in the system.
The government is in the process of studying the level of currency notes required for the economy and this would not go back to previous levels, he stated. The minister noted that honest citizens would benefit from formalisation of the economy.
This would increase the tax base, provide an avenue to lower tax rates, and create fair competition and a level playing field for all, he added. The minister stated that if all income earners pay tax honestly, there is the possibility of reduction in tax rates.
Goyal reiterated that costs of transactions through electronic means will be reduced and the government is in the process of studying applicable charges on debit and credit cards. After December 31, customers would not be charged on transactions through electronic means.
He observed that while there are over 70 crore debit and credit cards, most of these are not being used for transactions.
Replying to questions, Goyal said that the real estate sector needs special attention, and the government is considering lowering of stamp duty.
He welcomed the idea that public infrastructure projects should be expedited to boost demand. The minister also called upon industry to participate in communication outreach to popularise digital transactions.
CII Vice President Rakesh Bharti Mittal called for lowering of corporate taxes to 18 per cent and a commensurate reduction in personal income taxes.
He also suggested that micro financial products can help meet the needs of households who preferred to maintain cash balances.
CII Director General Chandrajit Banerjee said that the government should increase the number of POS machines to ensure smooth transition. Also, the use of mobile phones without internet connectivity for money transactions can be encouraged.