In a cashless economy, all commercial transactions are done through banking channels by way of cheques, bank drafts, Internet banking, debit or credit cards, e-wallets like Paytm connected to individual’s bank account or Unified Payment Interface (UPI) where payments can be made through mobile phone without internet network.
Mobile revolution has created an informal electronic banking system which does not require physical infrastructure as in the case of banks.
There are several advantages of digital economy which is more efficient and convenient which does not require visits to banks or ATMs. Risks of thefts, robberies, burglaries, extortions, criminal transactions, fake notes do not exist. This is also hygienic in absence of germ communication in handling currency notes. It is noticed that the societies which are cashless, there is less corruption and less tax evasion.
In cash crazy country like India, ninety eight per cent of the total economic transactions in volumes are done through physical cash, on which Reserve Bank of India has to spend annually around Rs 27000 crores in currency printing and distribution logistics. (In western world it almost opposite, cash transactions are just two percent). Out of this ninety eight percent, forty per cent are not disclosed or accounted for in account books to evade taxes by way of income tax, excise duty, service tax, value added tax etc.
Latest Government of India Income Tax Statistics reports that out of 80 crore adult population, only 3.65 crore ie about 4.5 per cent file their tax returns. Of this, 1/3rd do not pay any tax, 24 lakhs declare income of over 10 lakh, 74,027 declare income over 1 crore and 7,240 over 5 crore. Even those who are filing their tax returns under- report their real income except for salary earners where they do not have scope to evade.
As against these figures, individuals owning four wheelers are 4.40 crore and those who annually travel abroad for holidays are over 1.83 crore.
Evasion of tax and corruption is deeply rooted in Indian minds and has become a national habit. Indians are world champions to find ingenious ways and means to escape through any tax net. Recent example of illegal syphoning of black money on demonization of currency from well regulated banking system is testimony to this.
With the result, funds available for infrastructure development, roads, railways, health, education, irrigation, agriculture and other social objectives are inadequate forcing government to resort to external borrowings resulting in inflation which seriously affects poor and middle class and export trade.
It was reported that about Rs 12.50 lakh crore are held in foreign banks and assets in benami accounts or one man shell companies in tax haven countries. Within India, crores of black money is held in either cash, real estate, jewellery, unaccounted stocks or employed in business through bogus loans or lavishly spent.
Government of India is serious about reducing menace of black money. Opportunities were given to tax payers for voluntary declaration of undisclosed foreign assets and Indian assets through two Voluntary Disclosure Schemes, with poor response. On November 8, 2016, a bold and revolutionary step was taken to demonetize high value denomination notes of Rs 500 and 1,000 notes to curb tax evasion, corruption and fake notes.
Before demonetization, Government has activated Prohibition of Benamy Property Act and Prevention of Money Laundering Act to deal with depositing money in third party accounts and for laundering of illegal money through legal channels.
Demonetization and cashless transactions are complementary and supplementary to each other.
Government wants to shift black parallel economy into official white economy. This is possible only if substantial economic transactions gets through banking systems
Implementation of Goods & Service Tax from July 1, 2017 which requires mandatory reporting of transactions electronically without any human interface will greatly reduce corruption and tax evasion and support cash-less digital economy. Shortage of cash has significantly increased the use of digital medium of payment. However, there are hurdles for India moving cashless as large part of the population isilliterate and outside the banking network.
Goa is in an ideal position to have less cash economy because of educated population, extensive banking network, penetration of mobile phones, adequate Internet infrastructure. What is needed is traders, shopkeepers, street vendors to be encouraged to have card swipe or point of sales machines and for this banks in Goa should come forward to provide such facilities with targets, in their area of operation. College students who are familiar with digital operations should be roped in to provide guidance and demonstration of operating digital wallets devices like Paytm to general public in surrounding area and remove psychological barriers of security. As incentive additional marks can be given for their social work.
Government of India provide incentives by way of reduction in income tax to business operators with turnover less than Rs 2 crore by taking deemed profit on digital sales turnover at six per cent as against normal eight under section 44AD of Income Tax Act. Government of Goa can take the lead in reducing Value Added Tax by one/two per cent on digital sales transactions to provide incentive to general public and shopkeepers.
Cashless transactions have gone up significantly in recent weeks and this tempo should be kept up. Actual shift will be visible after the cash crunch is reduced. Growth will depend upon creating awareness among public and trading communities, technological development and government intervention on sustained basis.
The Ultimate goal should be to have a street vendor accept payment through mobile phone.
