Greetings of the day.
A new system of taxation is proposed by a Pune based research group Arthkranti Pratishthan where it has 5 components in its proposal:
1. Withdrawal of existing Taxation system completely (except Customs i.e. Import Duty)
2. Every Transaction routed through a bank will attract certain deductions in appropriate percentage as Transaction Tax i.e. Single point tax deducted as source.
3. Withdrawal of High Denomination Currency.
4. Cash transactions will not attract any Transaction Tax,
5. Government should make legal provisions to restrict cash transactions up to a certain limit.
Now, the first proposal of the research group is to remove completely all the existing Central, State or Local taxes, being Income Tax or Service Tax and others except the Customs or Import duties which are used to balance International Trade.
Another proposal is that banks will now deduct taxes at 2% on receiving i.e. credit accounts only. The tax of 2% will be used, say by:
Percentage of Tax
Bank for Expansion
Thus, India can now work for poor countries such as Africa, Bangladesh, etc.
Also, here the thing which can be done is that citizens should be made free of filing Tax Returns, Deposit Challans, etc because the tax is now directly deducted on all credit transactions by Banks.
Next Proposal is on removing High Denomination Currency. This is a much known fact that the high denomination currency is responsible for parallel economy. If say, Government removes all currency notes above Rs. 50, can a terrorist carry so many number of Rs. 50 notes with him or can money laundering be done with so many of notes!! But as per current scenario, YES, it is possible in Rs. 1,000 denomination notes. Also, the per-capita Income in India is Rs. 33,000 which if divided by highest denomination of Rs. 1,000 works out to 33 which is much lower as compared to USA or Japan.
Next proposal is that cash transactions should be made free from this taxation system but the limit for the same should be set up, say Rs. 2,000 instead of current restriction of Rs. 20,000. So, if a person has small transactions such as having of Golgappe or Samose, they are not supposed to pay this tax.
Now, the main question comes. Is our country’s Banking Infrastructure so strong!! The answer is No. In India almost half of the households don’t have bank accounts and even in few of the remote areas of the country even banks are not available.
Also, there come other questions. How will the people be motivated to do all transactions through bank!! Instead they will try doing transactions in cash itself. A 2% tax will mean a lot more pressure on common man though after removal of Income Tax. Even the people who are now benefitted by Exemption Limits of Income Tax will be covered under this tax. Also, how the government will be providing benefits to SEZ and others is the another question.
Though this taxation system will bring much more revenue to the Government, it has got its pros and cons which is being analyzed at present by the Country’s experts. Let’s see how the proposal gets implemented.
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