Gross tax collection on corporate and individual earnings has increased nearly 24% so far during the current fiscal year (FY). Attributing the rise in tax collections to demonetisation, Dr Ashima Goyal, member of the Reserve Bank of India (RBI)'s monetary policy committee (MPC), says increased tax collection will help the country move towards the ideal situation where low taxes are levied on a large base, says a report.
Noting that demonetisation had short-term costs but some long-term benefits, Dr Goyal says it enhanced digitisation and formalisation in the economy and reduced tax evasion, although all this has further to go, says a report from Hindu Business Line.
"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 says.
On 8 November 2016, prime minister (PM) Narendra Modi announced the demonetisation of old Rs1,000 and Rs500 currency notes. One of the key objectives of this unprecedented decision was to end black money, counter terror financing and do away with counterfeit currency and promote digital payments.
During September 2022, the gross goods and services tax (GST) revenues is Rs1,47,686 crore. This includes central GST (CGST) of Rs25,271 crore, state GST (SGST) of Rs31,813 crore, integrated GST (IGST) of Rs80,464 crore, including Rs41,215 crore collected on import of goods and sess of Rs10,137 crore, including Rs856 crore collected on import of goods.
This is the eighth month and, for the seventh month in a row now, the monthly GST revenues have been more than the Rs1.4 lakh crore mark. The growth in GST revenue till September 2022 over the same period last year is 27%, continuing to display very high buoyancy. In August 2022, 77mn (million) e-way bills were generated, marginally higher than 75mn in July 2022.
When asked about the central bank digital currency (CBDC), Dr Goyal says 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 says.
Earlier this month, RBI released a concept note on CBDC for the country. CBDC can be classified into two broad types, general purpose or retail (CBDC-R) and wholesale (CBDC-W), and RBI says it would soon start pilot launches of e-rupee for specific use cases.
RBI broadly defines CBDC as the legal tender issued by a central bank in a digital form. "It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value. CBDCs would appear as liability on a central bank's balance sheet," it says in the concept note.
According to the RBI's MPC member, multiple policy levers available to reduce the deficit, among shorter-term measures, are exchange rate depreciation and reducing aggregate demand. "More emphasis should be on longer-term sustainability-aiding measures such as reducing oil intensity as well as dependence on energy imports and encouraging exports," Dr Goyal was quoted in the report.