So it is final. Decks have been cleared for implementation from 1 July, 2017 the regime of fusing Aadhaar with permanent account number (PAN). The Supreme Court has cast its imprimatur on the fusion move brought about by the Finance Act, 2017 perhaps sold on the rationale proffered by the Finance Minister---in the absence of such fusion, charlatans with multiple PAN cards are thumbing their noses at the taxman with impunity. Aadhaar with its accent on biometric features will halt the bahrupiyas (impostors or charlatans) in their tracks because even if fingerprints are tampered with, iris cannot be. Medical science permits plastic surgery to enable change of physiognomy or physical appearance but iris is immutable. Be that as it may.
But then tax evaders have learnt long ago that it pays not to come into contact with the tax authorities at all. With the GST council deciding to give small traders a long rope----Rs 20 lakh annual turnover being the cut off point for registration---a vast number of traders are bound to embrace smallness. This would be akin to the prohibition fallout. Prohibition is well-intentioned but impractical because boot-legging and smuggling get an impetus resultantly. These are more damaging to the nation’s fiscal health and individual’s physical health. Similarly, while dovetailing of PAN with Aadhaar may once again please the moralists, it would have the effect of repelling fence-sitters, neo-converts and those who can afford to remain small.
Under the GST regime the last mile seller i.e. the retailer, the typical mom-pop store as well as others would happily and deliberately remain small because they do not need input credit in any case that otherwise is the compelling factor for falling in line for his predecessors in the supply chain. GST regime’s single most failing has been it has left out important products like petroleum from its purview besides pandering to the demands of the small traders to leave them alone. And it is these small traders who would push their envelopes further and see wisdom in avoiding the income-tax authorities as well after having successfully avoided any interaction with the GST administration.
The government first ought to have tightened the noose around the business community by using GST as the dragnet without any holes, exemptions or escape routes. The presumptive taxation scheme obtaining for small traders offers the olive branch to them by condescending to accept just 8 percent of their turnover as taxable profits if their turnover did not exceed Rs 1 crore during the financial year. At a time when it was gaining traction with the small traders, the government has let them off the hook with its GST exemption. Now the one with Rs 1 crore of turnover would see merit in running his business under 5 different banners, each with a turnover of not more than Rs 20 lakh. There are ways of doing so without falling foul of the benami law.
In other words, the government has shown unseemly and unnecessary hurry. It should have first increased the number of income taxpayers before dovetailing PAN with Aadhaar. And it is delusionary to believe and make others believe that individuals alone are charlatans with multiple PAN cards. There are shell companies galore in this country most of them private that do no more than money laundering.
It is naïve to believe that individuals are at the forefront of tax evasion. There are thousands of religious and public charitable trusts that are used by crooks as tax evasion tools. Jaitley should have mounted a concerted attack on these institutions. But he has chosen the easiest way forward---targeting individuals. Soft targets and sitting ducks have always been the taxman’s focus.
Published Date: Jun 12, 2017 03:27 pm | Updated Date: Jun 12, 2017 03:27 pm