Demonetization has given rise to two common day slogans of ‘Remonitization’ and ‘Digitization’. Remonitization, which is an act of restoring the status of legal tender, has not been a success yet with ATMs or banks running dry some or most of the times. Digitization is all about promoting electronic transactions which is by far the most welcome measure and almost saved the economy from after- effects of demonetization. The concerted efforts of the Government of India, banks and private sector wallet companies have been truly to be lauded who have balanced the trade and business to a large extent. But despite such slogans and speedier efforts to print and demonetize the currency the ground level situation is still serious. People find not enough cash at ATMs and struggle on daily basis. And the situation is not getting back to normal as ever even after about four months of demonetization.
What is more bothering is that the Government has in the budget 2017 introduced several curbs and restrictions on cash spending and cash transactions. For instance businesses would have to give up tax breaks and deductions for their cash spending in excess of Rs. 10,000/-. Traders cannot receive and pay cash even for their trade related transactions. If they do so then they can be penalized too. Even some banks have starting levying charges of cash transactions. All of this is taking us away from remonitization pledge. Till yesterday we had pushed people to deposit all their cash holdings into the banks and taken a pledge to restore the cash of equivalent value to them. But now with the budget proposals we have introduced curbs on cash transactions be it in the form of transaction for purchase of say mobile or selling stocks or even payments of salaries.
These measures are obviously meant to discourage cash transactions but given that the promise of Remonitization is remaining to be fulfilled it is not at all ripe to bring into effect cash curbs in the tax laws such as this so much so fast. By putting these cash curbs into the tax laws we are almost forcing people to stay away from cash transactions. In a sense therefore we are moving away from remonitizing the economy. The Government thus must defer such curbs until the time ATMs and banks have enough of cash to allow people to draw normally in any form and denomination. Until that situation arises there is no righteous justification whatsoever to bring in such tax proposals to put cash curbs on legitimate business and non business day to day transactions.
The Government must promote the transactions and not just electronic transactions for widespread promotion of trade and commerce in the economy.
Gopal Nathani
FCA