PAN cannot be the panacea unless both buyers and sellers come under its pincer
When you enforce something on such a wide-ranging array of transactions, the seller himself must be under the pincer of the income tax authorities
The government has mandated disclosure of permanent account number (PAN) by those indulging in high volume cash transactions from 1st January 2016. For this purpose, a dichotomy has been resorted to---luxury spend and others. Under the first category comes hotel bills and foreign travel tickets---the threshold for mandatory PAN disclosure for which is a smaller Rs 50,000. All other cash spends require mandatory PAN disclosure when the Rs 2 lakh threshold is breached.
When you enforce something on such a wide-ranging array of transactions, the seller himself must be under the pincer of the income tax authorities. India is chock-a-block with hotels, and one wonders if all of them are tax compliant. More specifically, whether all of them have TIN or tax information number under local VAT at least. May be the ushering in of GST might force them to obtain registration. Should that happen GST and income tax enforcement can be integrated but till then small town hotels at least may go on as usual blithely.
Even in large towns the time tested stratagem of splitting will come handy. If you apprehend payment of more than Rs 50,000 to a hotel, better check out every day or once in a couple of days before the dreaded threshold is reached! Foreign travel however is a different kettle of fish where the scheme may work with a modicum of success.
Jewelers and goldsmiths also exist in every corner of India, rural or urban. In fact, they have a conspicuous presence in rural areas where gold is the only avenue for investment apart from land. Bringing down the threshold from the present Rs 5 lac to Rs 2 lac may not work because goldsmiths themselves are not paragon of virtues. If they themselves aren’t borne on the income tax records, they won’t want their buyers to be either because in that case their own game would be up.
Blanket exception made in favor of post office deposits is not a wise move. To be sure, it would garner funds for the government but wily tax evaders will seek its sanctuary thus making post office deposits a money laundering tool.
Patients and their families face genuine difficulties when they are not covered by insurance. Even five star hospitals insist on cash at the time of discharge for obvious reasons---cheque may bounce and there is no way of gunning after the patients. How would they acquire PAN at such a short notice?
Insistence on furnishing of PAN by purchasers of immovable properties for more than Rs 10 lakh is a wise move. Hopefully, it doesn’t distinguish between cash and cheque components. In other words, anyone paying cash or through banking channels and acquiring an immovable property for more than Rs 10 lakh will have to disclose his PAN number. One cannot demur or grumble because admittedly the transaction is big and seminal.
The government would do well to dovetail Aadhaar with PAN. Better still, they should be fused into one like the American social security number. Otherwise, there may be a last minute scramble for PAN.
Better still, we must instead of addressing the problems arising out of cash payments with PAN, seek to progressively eliminate the role of cash itself by building in incentives and disincentives into bank and cash payments respectively. Jaitley was right when he promised to give suitable indirect tax rebates to traders and service providers accepting cards and income tax rebate to payers. Travel agents and airlines presently punish those paying online with a convenience fee. This must go.
Gujarat High Court Advocate Avinash Poddar, who was also the arguing counsel in the case, said it is expected that now the Government will come up with Valuation Rules as earlier done in the service tax regime
Sushil Chandra, however, added that sharing Aadhaar details will be voluntary for voters, but those not doing so will have to give ‘sufficient reasons’