What demonetisation did to tax collections. The good and bad sides of the move have been put forth by many for years and the argument has still not died down. Now RBI Monetary Policy Committee (MPC) member Ashima Goyal has attributed the rise in tax collections to demonetisation.
On November 8, 2016, Prime Minister Narendra Modi announced the scrapping of old Rs 1,000 and Rs 500 banknotes and one of the key objectives of the unprecedented decision was to curb black money flows and promote digital payments.
Hailing the demonetisation move, Goyal said it had short-term costs but some long-term benefits, adding it enhanced digitisation and formalization in the economy and reduced tax evasion, although all this has further to go.
“It contributed to the buoyancy in taxes the country is benefitting from today. This helps us move towards the ideal of low tax rates on a large base,” she was quoted by PTI as saying.
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The gross collection of tax on corporate and individual earnings jumped nearly 24 per cent so far in the current fiscal year to Rs 8.98 lakh crore.
GST collections remained above Rs 1.40 lakh crore for the seventh month in a row at Rs 1.47 lakh crore in September, a 26 per cent in-crease over last year, reflecting buoyancy in tax collection.
However, earlier this month former Congress president Rahul Gandhi said that the BJP’s policies of demonetisation, GST and farm laws are weapons aimed at India’s poor and small businessmen.
Replying to a question on Central Bank Digital Currency (CBDC), Goyal said the objectives of the CBDC are to reduce the use of cash, and provide additional functions to the existing payment system rather than replace it.
“CBDC can certainly meet new needs in the digital age, reach remote areas and enhance financial inclusion, and save costs since cash is expensive and cumbersome,” she noted.
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Recently, the Reserve Bank said it will soon commence the pilot launch of the e-rupee for specific use cases with a view to bolstering India’s digital economy, making payment systems more efficient and checking money laundering.
