Political backlash notwithstanding, the government stayed firm that its November 8, 2016, decision to withdraw ₹500 and ₹1,000 notes has helped crack down on black money.
On Tuesday, the Narendra Modi-led government fielded Finance Minister Arun Jaitley to defend last year’s decision as Opposition parties mounted their attack, terming November 8 as ‘Black Day’.
Taking on those who opposed to the decision to withdraw 86 per cent of the currency in circulation on November 8, 2016, Jaitley said it had “removed anonymity”, increased the tax base and resulted in higher tax payments. “Overall, it would not be wrong to say that country has moved on to a much cleaner, transparent and honest financial system” even if its benefits may not yet be visible to some people, he said in a Facebook post on the first anniversary of demonetisation.
Gross collections (before adjusting for refunds) increased by 10.7 per cent to ₹5.28-lakh crore during April-October 2017. Jaitley pointed out that post-demonetisation, currency in circulation is lower by ₹3.89-lakh crore and is no longer anonymous. “With the return of ₹15.28-lakh crore into the banking system, almost the entire cash holding... now has an address,” he said, adding that the tax administration and other agencies are using big data analytics to crack down on suspicious transactions.
While self-assessment tax paid by non-corporate taxpayers increased by 34.25 per cent between April 1 and August 5, advance tax paid by non-corporate taxpayers rose 42 per cent.
Action has also been taken against more than 1,150 shell companies. Suspicious transactions under the radar range from ₹1.6-1.7-lakh crore. Market regulator SEBI has introduced a graded surveillance measure at stock exchanges.
Jaitley also noted that demonetisation led to a move towards a less-cash society and a big leap in digital payments. As many as 110 crore transactions valued at around ₹3.3-lakh crore, and 240 crore transactions valued at ₹3.3-lakh crore, were carried out through credit cards and debit cards, respectively.
Social security “Demonetisation appears to have led to acceleration in the financialisation of savings,” Jaitley said, adding that there is a shift towards greater formalisation of the economy in the near term aided by the introduction of Good and Services Tax. This has helped more workers get social security benefits as reflected in the increase in opening of bank accounts for workers, enrolment in EPF and ESIC, he said.
With access to fake currency notes also down, Jaitley said protests in Jammu and Kashmir and Naxal activities had fallen. “These miscreants have run out of cash,” he said.