GST Caught Between Political Tussles – Fallout of Demonetisation and the wave thereafter!
Would Prime Minister Modi have thought that his ‘surgical strike’ on black money have an impact on the other proposed wonder drug of the economy – the GST? Well it looks like it is creating an impact on those lines. The tsunami that the demonetisation process has brought has led to feuds between the government and the opposition, besides generating a mixture of responses from the public and media. This animosity on the political front has caused the GST drive to suffer a setback.
And while on Taxes, the country’s finance minister has hinted now that the tax rates might be lowered –the assumption being that demonetisation would bring in higher tax revenues from unaccounted wealth. Considering the fact that digitisation would push a greater number of people to be in the tax net, it is hoped that in the future the taxation levels would end up being much higher. Consequently, tax rates could be made more reasonable for both direct as well as indirect taxes.
For now, people are hoping that the government might bring in a number of concessions for the taxpayer – be it individuals or the corporate sector. This would ease out the pain felt during demonetisation. The steps could vary from tax slab revision to reduction in corporate taxes to tax exemptions and rebates. All this is expected to target farmers, small traders, small and medium businesses and the youth. Over the past one month or so, the government has in any case been giving incentives to encourage digital payments. The currency situation is expected to improve by the third week of December.
Meanwhile, more than a month after demonetisation, these are some of the noticeable trends in the Indian economy:
- Projected GDP growth for this fiscal year is 7% – this is as per the estimate given by the Asian Development Bank.
- The figure for the next fiscal year is about 7.8% – as per ADB, the impact of demonetisation is temporary
- Some of the incentives for cashless transactions were :
- 5% discount by Railways for online payment on facilities like e catering and booking retiring rooms
- 5 % discount by the Railways on season tickets that are purchased digitally January 1, 2017 onwards
- The banks had released about Rs. 4 trillion back into the system till the first week of December
- Banks had got about Rs. 12.4 trillion in deposits till mid December , since Demonetisation
- Amongst other aspects, the IMF survey on Financial Access pointed out that the number of ATMs per 100,000 adults is 19.71.
- As of midnight December 15, the usage of the old 500 notes would stop completely – beyond this, the notes would only be deposited in the banks till December 30 and be exchanged at the RBI till March 31, 2017 (under special circumstances).
- Till midnight December 15, the old 500 notes can be used in the following places:
- Government hospitals and pharmacies
- Consumer Cooperative stores
- Government Agricultural Research centres and related organisations
- Government milk booths
- Payments at all pharmacies
- Purchase of LPG cylinders
- Toll payments
- Fees, charges taxes, penalties towards government organisations
- Utility charges like electricity and water
- Court fees, Government school fees
- The RBI updates its notifications and frequently asked question list (FAQs) for people to understand the basics of note deposit and exchange – it lays down certain specifications for NRIs also.
- Although we try to bring you all the latest information, there are frequent changes and declarations made by the government. We would advice all our readers to keep checking the RBI official site (www.rbi.org.in) for authentication of all facts.