Centre walks the fine line on capping cash at Rs 15 lakh
The Union government has not rejected the Supreme Court-appointed special investigation team's recommendation of capping cash holdings at Rs 15 lakh, but wants to ensure that the move does not lead to harassment and that all safeguards are in place before it is implemented.
Similarly, officials said, the proposal for a CM's panel to levy tax on cash transactions of over Rs 50,000 needed to be analysed to ensure that it does not result in higher cash holdings.
"We need to see what happened during those three years when Banking Cash Transaction Tax (BCTT) was in place. We also need to see that there is no additional cost burden. Today, a trader deposits the cash with him in a bank account and withdraws it when he needs it. We should not create a situation where there is a disincentive and he prefers to keep cash," said a source, adding, "We are examining it. The report came close to the Budget and we have not looked at the proposals in detail."
The then finance minister P Chidambaram had imposed the BCTT-which was withdrawn three years later amid protests.
On Wednesday, the Centre accepted the SIT's other recommendation by banning cash transactions above Rs 3 lakh. Officials said the feedback on a cap on cash holdings was adverse as some businesses may have genuine requirements.
For instance, some entities need cash to pay wages on a daily basis. Similarly, retailers often have daily sales of over Rs 5 lakh and can accumulate over Rs 15 lakh if they are unable to deposit it in a bank account for two-three days.
"It may also result in inspector-raj as shopkeepers may be asked to show their cash books. We already have power to search in case someone is holding black money ," an officer explained.
Similarly, officials said, the proposal for a CM's panel to levy tax on cash transactions of over Rs 50,000 needed to be analysed to ensure that it does not result in higher cash holdings.
"We need to see what happened during those three years when Banking Cash Transaction Tax (BCTT) was in place. We also need to see that there is no additional cost burden. Today, a trader deposits the cash with him in a bank account and withdraws it when he needs it. We should not create a situation where there is a disincentive and he prefers to keep cash," said a source, adding, "We are examining it. The report came close to the Budget and we have not looked at the proposals in detail."
The then finance minister P Chidambaram had imposed the BCTT-which was withdrawn three years later amid protests.
On Wednesday, the Centre accepted the SIT's other recommendation by banning cash transactions above Rs 3 lakh. Officials said the feedback on a cap on cash holdings was adverse as some businesses may have genuine requirements.
For instance, some entities need cash to pay wages on a daily basis. Similarly, retailers often have daily sales of over Rs 5 lakh and can accumulate over Rs 15 lakh if they are unable to deposit it in a bank account for two-three days.
"It may also result in inspector-raj as shopkeepers may be asked to show their cash books. We already have power to search in case someone is holding black money ," an officer explained.
