Demonetization Drive:
The entire demonetization drive has been started to unearth black money and move the country towards a cashless society. However, the million-dollar question is – WILL DEMONITIZATION HELP ELIMINATE BLACK MONEY AND USHER US IN A CASHLESS SOCIETY?
The initial sentiments seems that the common man has wholeheartedly supported the move but there seems to have been not much success in unearthing black money. However, news like “India’s Political Parties Can Deposit Old Notes With No Tax Investigation” gives a sorrow feeling like that “all politicians are a saint and common man on the street is cheat”. Our Finance Minister, Arun Jaitley has made statements “No Exemption for Political Parties”….. I hope the Government stands by it.
Now let me focus Why Cash will be King for a long time in India…unless corrective measures are taken. I am going to discuss a few issues which impact lots of people and does not support the cause of Cashless Society
Tax Structure (Service Tax & VAT) – We, the common man as end consumers pay about 15% Service Tax (inclusive of Cess) and 6% to 13.5% VAT. However, we do not get any rebate or refund on the same. Let me explain this with examples:
Assume you go to a Hardware Shop and buy some Fixtures worth Rs. 2,000/- for your house. The shopkeeper typically gives you a bill which is on an Estimate Memo. If you ask for a real (pakka) Bill. The shopkeeper will ask for additional13.5% VAT which would mean Rs. 270/- going extra from your pocket.
Assume you have a Birthday Celebration and the Video Shooting cost is Rs. 5,000/- and you ask for Receipt. The Photo Studio person will add 15% on top of it and it will mean an additional expense of Rs. 750/-
As a middle-class family person, many will simply say “No Receipt Required” in the above scenarios. Why?
- As a salaried person, the income is already taxed
- By taking the Bill he has to incur an additional cost.
- Unlike a Business House, he will not get rebate/refund on Service Tax or VAT paid by him.
- A Business Entity can adjust the Service Tax paid by it against the Service Tax collected by it and similarly they can claim a refund on VAT. No such provision for the end consumer.
It is proposed that GST will replace Service Tax and VAT. Only time will tell how far GST will be successful to curb this menace.
(Mera Pyare Desh Wasiyo) Should our Tax Structure be not improved to favour the Salaried Person?… till then the Salaried Common Man knowingly or unknowingly will help the Business Common Man generate Black Money.
Banking Reforms
Debit Card Fee: Banks charge about Rs. 150/- plus S.Tax as Annual Debit Card Fee whereas there is no such charge on ATM Card. So banks are forcing a customer to take ATM Card, Withdraw Cash and then use Cash to transact at Merchant. (Mera Pyaare Desh Wasiyo) Should RBI not intervene and ask banks to stop charging customers Annual Fee on Debit Card? I feel unwarranted Annual Fees should not be levied on Debit Card
Interchange Income: Merchants have to typically pay about 2% of the Card Transaction as Interchange Fee. As such they tend to dissuade customers from swiping the card or ask for an additional 2% if payment is made by card. (Mera Pyaare Desh Wasiyo) Is 2% not high for Business? I feel to promote Cashless Transaction the cost of using the plastic has to be brought down
Card Insurance: Many Banks and Insurance companies call up customers to sell Card Fraud Insurance even though Credit Card by default has a Fraud Protection Cover. These products tend to instill fear in the end-user and dissuade them from using Digital Channels. (Mera Pyaare Desh Wasiyo) Should our electronic transactions not have Good Fraud Insurance Cover by default? I feel Awareness Creation is more important and our Electronic Transaction should have Fraud Cover at no additional cost
Concluding Note:
There are many other reasons like illiteracy, lack of banks and financial services in rural areas and more. The above are just a few examples of why a common man may continue to transact in cash and may not ask for the bill while buying. I sincerely feel the Common Man is very honest & laborious, however, we require a fair tax system where the Salaried does not feel that he is always at the receiving end. I hope the upcoming budget provides significant incentives for Cashless Transactions.
Kindly share your comments and suggestions.
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