The government’s move to promote cashless transactions through the electronic payment system is very welcome though it would be a huge task to implement. India has the largest amount of cash transactions in the world. The objectives are laudable as they are expected to curb black money and bring more people in the tax net by giving the tax authorities a money trail to enable them to catch tax evaders. According to the draft proposals, in a bid to cajole people to move to cashless transactions the government has announced various incentives, from tax breaks for consumers and merchants/shopkeepers to asking credit card companies, petrol pumps, telecom companies and others to reduce or eliminate the surcharge, which is quite hefty and makes goods and services more expensive.
It is also going to make it mandatory to pay bills of Rs 1 lakh and above electronically. The point is, will the various stakeholders take the bait? The incentives, while attractive on the face of it, are still measly compared to the advantages that both the buyer and the seller get from cash payments. Imagine all those society ladies coming with suitcases of cash to buy designer bags, accessories and clothes at the luxury super-brand stores. Items run into lakhs of rupees each and one imagines they would hardly want to explain to the taxman where this money came from. Similarly, builders and customers save much more through cash payments than they would through the incentives given for electronic transactions.
Also, if state governments are supposed to give merchants, etc., the facility of a discount on VAT payments for electronic payments, they may not want to forego the revenue unless they are reimbursed by the Centre. Another factor the government would have to consider is cybersecurity. Many people, especially among the older generation, are wary of people hacking into their accounts, and India is one of the countries prone to hackers. While one wishes the government well in this Herculean attempt, perhaps it needs to consider the suggestion of its chief economic adviser, Arvind Subramanian, who said while chasing black money could send a wrong image about the country, to him black money was more important in terms of what it signalled India was doing about things like arbitrariness, tax rules, discretion and corruption. We need to be very serious about addressing them. It is not that the government has not considered this, but there is lack of political will in dealing with it on a war footing as it is alleged that politicians and bureaucrats have the most black money. These matters need to be handled with the same urgency and intensity as the Prime Minister employed in his Jan Dhan Yojana.
