Team-BHP > Shifting gears


Reply
 
Thread Tools Search this Thread
Old 13th September 2018, 12:32   #2716
Senior - BHPian
 
longhorn's Avatar
 
Join Date: Nov 2009
Location: Chennai
Posts: 1,376
Thanked: 848 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by earthian View Post
...., DeMo was a failure. So bash the PM and the Government.
When you make big bang announcements which are going to affect almost every citizen in the country you are expected to apply enough thought process to it. When a dictator makes the decision without so far as even consulting the FM on the same, he should, at the bare minimum, have the decency to take responsibility for his actions. The former RBI governor had given sufficient indications to the ruling dispensation that nothing worth the while will come out of this. He was sacked for not toeing the party line.

The man who made the big announcement, himself said 'give me 50 days. burn me alive if I fail'. Of course we wouldn't want to waste precious fuel on this man. If he had said sorry we made a mistake, many would have forgiven him. Instead when you keep belting out one BS after another, bashing is the very least you should expect. It not like the govt came to your house and exchanged your old notes for new. You were made to stand in a queue, beaten with lathis and what not, all for exchanging your hard earned money. The GDP took a beating of 2.2 percentage points. Many SME's winded up. Millions of jobs were lost. After putting the common man through all this hardship, what exactly have we achieved?
longhorn is offline  
Old 13th September 2018, 12:39   #2717
Senior - BHPian
 
sgiitk's Avatar
 
Join Date: Dec 2007
Location: Gurugram
Posts: 7,882
Thanked: 4,512 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

@longhorn; If you are correct then how have tax receipts gone up, by all accounts black money transactions are down, etc.
sgiitk is offline  
Old 13th September 2018, 12:56   #2718
Senior - BHPian
 
longhorn's Avatar
 
Join Date: Nov 2009
Location: Chennai
Posts: 1,376
Thanked: 848 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by Nav-i-gator View Post
When was the last time you saw Rupee vs dollar at such lows and still current account deficit is under control?
What makes you think CAD is under control ? With the rupee devaluing day after day, other things being equal, CAD will increase.

Quote:
Originally Posted by Nav-i-gator View Post
When was the last time you saw diesel prices at an all time high but retail inflation going even lesser?
When was the last time you saw a government change the method of calculating GDP and inflation to suit them?

Quote:
Originally Posted by Nav-i-gator View Post
When was the last time you saw high fuel prices, weak Rupee AND a govt who have failed on policy front but still retail investors pumping in record money into share markets, taking it to new highs?
Seriously? The sensex just tanked around 500 points over the last two days.

Quote:
Originally Posted by Nav-i-gator View Post
When was the last time you saw such a big jump in no. of people filing their IT returns?
Quote:
Originally Posted by sgiitk View Post
@longhorn; If you are correct then how have tax receipts gone up, by all accounts black money transactions are down, etc.
Please check the facts. Both the number of people filing returns and the income tax collection always goes up YoY. This has been the case since 2009 if I'm not wrong. There is no abnormal increase in tax filing or collections due to demo.

I'm not sure of your source of information on black money, but at least in TN, 180 crores in liquid cash was caught in a raid on just one contractor. It is just the cash component. I'm not getting into gold and other land documents.

Quote:
Originally Posted by sgiitk View Post
Basically it seems that many people will be happy to get a subsidy even though it drives up inflation down the line.
Could you please specify the product on which you are referring to subsidy. If it is petrol or diesel, there is no subsidy on either of them. In fact we are paying 80 rupees for a litre of petrol, which the pump gets for 40 rupees, rest being taxes mopped up by the government.

Quote:
Originally Posted by sgiitk View Post
Now that we are running a Monetary economy the high inflation option of Keynesian economics is no more. The worst will be so keep doing flip-flops. In the long term this will pay. The best examples of Monetary economy are Germany and also UK (Maggie T days).
In the long term, we would all be dead, so it wouldn't matter.

Last edited by longhorn : 13th September 2018 at 13:06.
longhorn is offline  
Old 13th September 2018, 13:09   #2719
Distinguished - BHPian
 
Join Date: Aug 2014
Location: Delhi-NCR
Posts: 2,411
Thanked: 21,073 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by earthian View Post
The debate is:

"Whether DeMo was purely for political gains (UP elections) ; or was it for other reasons, with political benefits being the side benefit."

Nobody says that the intended (non political) gains have been realised as touted. No. So, in that sense, DeMo was a failure. Yes. Hopefully, over the next few years, some tightening up due to the electronic trail may take place. We shall have to watch and wait.

But the UP elections were won. In my opinion, the side benefits were realised. And other regional political parties had to scramble too. I liked that.

But to conclude that since political gains were realised, that was the main aim from the beginning, is extrapolating beyond reason and that is why i mentioned that :

"You throw the dart and draw a bull's eye where it strikes"

As V.Narayan said, DeMo was a failure. So bash the PM and the Government.
Thank you earthian for your earthy and balanced post. It is interesting that you and I are saying the same thing as the other anti-NaMo members here but it seems they don't like that folks like you & me are not spitting fire and vengeance against the Prime Minister and writing strong sentences with negative words and phrases.

Mates, I have expressed my view earlier that DeMo is a failure. But I will not hurl thunderbolts and invective statements at our Prime Minister or judge him on one programme alone. If you hate him so please cast your vote appropriately in 2019. In my opinion this Govt is way way way better than UPA-II or Rajiv Gandhi (1984 to 1989) or the mish mash we had between 1996-98 and 1977-80. I certainly do not wish to see Rahul Gandhi or Mayawati or Mamtaji as the PM. Nitin Gadkari might actually make a great PM in my view but it is just the view of one voter. However my assessment is NaMo will be his party's choice and he will be the next PM either by his own majority or with help of his allies.

If you want a debate on NaMo and NDA-II then let's list out achievements and shortfalls and have a civilized debate. I am sure all members will earn from each other's views. By standards of today I am relatively new to social media and have as yet failed to appreciate that a balanced polite Oxford debate is out of fashion on social media. Wonder if the age of nuanced statements has passed.
V.Narayan is offline  
Old 13th September 2018, 13:59   #2720
BHPian
 
Join Date: Sep 2015
Location: Gurgaon
Posts: 569
Thanked: 1,407 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by longhorn View Post
What makes you think CAD is under control ? With the rupee devaluing day after day, other things being equal, CAD will increase.
Govt has bought Gold recently, to negate the uncertainty in rupee vs dollar rates

Quote:
Originally Posted by longhorn View Post
When was the last time you saw a government change the method of calculating GDP and inflation to suit them?
I didn't say anything about GDP growth. However, basket of products (and services) used to calculate retail inflation is changed rather frequently. Last time, it was changed under previous Govt, if I remember correctly.

Having said that, it still is a "mystery" how all time high diesel prices has not affected retail inflation.

Quote:
Originally Posted by longhorn View Post
Seriously? The sensex just tanked around 500 points over the last two days.
So, you would conveniently choose the duration (2 days, 2 months or 4 years) to suit your argument. Fair, isn't it?


Quote:
Originally Posted by longhorn View Post
Please check the facts. Both the number of people filing returns and the income tax collection always goes up YoY. This has been the case since 2009 if I'm not wrong. There is no abnormal increase in tax filing or collections due to demo.
Yes it does. But not to the extent it has in the last 2 years (post DeMo).

Quote:
Originally Posted by longhorn View Post
I'm not sure of your source of information on black money, but at least in TN, 180 crores in liquid cash was caught in a raid on just one contractor. It is just the cash component. I'm not getting into gold and other land documents.
As I said, this proves that DeMo failure is in fact our failure. We refuse to be honest

Quote:
Originally Posted by longhorn View Post
Could you please specify the product on which you are referring to subsidy. If it is petrol or diesel, there is no subsidy on either of them. In fact we are paying 80 rupees for a litre of petrol, which the pump gets for 40 rupees, rest being taxes mopped up by the government.
Subsidy is nil NOW, it was there during and untill last Govt. It's easy and populist to do it - reduce retail prices of fuel by subsidizing it and then pull it off from our pockets through indirect means (higher inflation, high lending rates, lower growth etc)
Nav-i-gator is offline  
Old 13th September 2018, 15:18   #2721
BHPian
 
earthian's Avatar
 
Join Date: Jan 2016
Location: Ahmedabad
Posts: 476
Thanked: 1,230 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by longhorn View Post
When a dictator makes the decision without so far as even consulting the FM on the same, he should, at the bare minimum, have the decency to take responsibility for his actions.
You would know what really happened , wouldn't you?

Quote:
You were made to stand in a queue, beaten with lathis and what not, all for exchanging your hard earned money.
I was an eye witness to one such happening. I had gone to my Bank to get the allowed 10k, when i saw a long line of people, who by their attire seemed to be from the working class. i asked the Bank manager (this was a foreign bank) as to why more counters were not opened to exchange the old notes for new. His answer stumped me. The people standing in line, clutching the old 1000 or 500 rupee notes ( i think the maximum allowed to be exchanged was Rs 2500/-) came to the bank en masse in a tempo van (such as Tata 407) from a village in the suburbs. Customers of the bank were given a seperate counter whereas the bulk of the counters were used for such converters.

The deal given to them by a prominent person was "Get new notes for Rs 2500, keep Rs 500/- and give me back Rs 2000/-. It was an easy way to earn at least 1000/- per day and some even earned 1500/- or more per day. Just stand in line! For labourers who had to sweat for 8 hrs and spend another 2 hours commuting to earn Rs 300-400/-; this DeMo was like Manna from heaven. Over the course of the next few weeks, no labourers were available for any projects - not because DeMo had robbed them of their livelihood, but they had an alternate job available. True, some of the projects may have stopped since the owners were scrambling to convert their ill gotten wealth, and had probably used these very same labourers to do their dirty job. Still others may have stopped due to genuine shortage of raw materials. I am not splitting hair here.


Some genuine and/or poor and/or aged people would also have been standing in that line, along with the paid converters. When there used to be a delay in processing or Aadhaar cards or other ID was asked, a ruckus was created and during the ensuing action of the police, some genuine, aged, law abiding citizens would also have been hurt. Very sorry about that.

The bank manager said that the tempo collected the people after the bank closed and the same people stood in line multiple times over. It was a money laundering business. I do not feel sorry for such people, even if they were lathi charged.

There are stories where after bank hours, hordes of old notes were exchanged for a preferred customer by photocopying all the exchange statements of another bank/branch and attaching them. An audit of the exchange done by these banks during the first few weeks would show that it would have been impossible to transact that many customers exchanging Rs 2500/- in 24 hours leave alone banking hours.

And there are other stories too. I am not going into those.

Point being made is that we tend to become champions of the "oppressed" and the "poor" without really knowing what the ground reality was. The media, in its selfish aim to increase TRPs sensationalised all aberrations and sob stories without going into details or being at least judicious.

Social media has also played its part with every party employing rabble rousers and hecklers to influence, heckle, criticise and win over the genuine sitting-on-the-fence members. Over time, these members also become champions.

Mind you, i am not saying T-BHP members have been influenced and are toeing a line, adroitly laid by these rabble rousers. Neither am i saying they aren't.

DeMo was an ambitious move. It failed because of us - ordinary citizens- who did not support the endeavour whole heartedly. When we saw our cash rich neighbour employing such means to convert his black money, did we blow the whistle? No. We preferred not to get involved.

Yes, whistle blowing and its consequences -both for the blower and the culprit- is a separate chapter that requires a thorough discussion. Society cannot improve unless good prevails over evil- and to repeat a umpteen quoted adage of Edmund Burke:

The only thing necessary for the triumph of evil is for good men to do nothing.

Let's ask ourselves, Gentlemen: "What have we done?"

Last edited by earthian : 13th September 2018 at 15:44. Reason: house keeping
earthian is offline  
Old 13th September 2018, 15:48   #2722
Team-BHP Support
 
Chetan_Rao's Avatar
 
Join Date: Jul 2010
Location: Bangalore
Posts: 3,276
Thanked: 10,413 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Not a political opinion specifically, but I don't have much patience for anyone who gets into a position of responsibility claiming they'll take a different path from the status quo, then spend their entire time in that position justifying their failures by pointing at the erstwhile status quo.

This applies to everyone right from my local municipal councillor to the highest office in the land.

A common citizen's life never really changes overnight due to a policy decision (extreme events are outliers, not the norm), so I look at judging in the short-term as an ultimately futile exercise.

I'm a firm believer that incremental change is the only lasting change. Explosive change fizzles out as quickly as it happens, and the collateral damage is often larger than expected.

There's nothing else for me to add, and I have no appetite for a pro Vs. anti politician mudslinging match that plenty on here are indulging in, so best to step out.

P.S. Will repeat a request I made a while ago. Let's stop passing off our personal anecdotal experiences as overarching facts. Each of our experiences are as (in)valid as another's, and none of us have experienced the whole gamut first hand, so let's be considerate instead of condescending while presenting our arguments.

Last edited by Chetan_Rao : 13th September 2018 at 15:54.
Chetan_Rao is online now  
Old 13th September 2018, 17:01   #2723
BHPian
 
Join Date: Aug 2009
Location: Virar(Near Mumbai)
Posts: 82
Thanked: 12 Times
Default

Quote:
Originally Posted by Nav-i-gator View Post
As I said, this proves that DeMo failure is in fact our failure. We refuse to be honest
You all summed it up man! How much success it is depends upon many factors including political polarity. All said and done what I feel that there should be slow backdoor demonetisation of 500 and 2000 notes. Maximum denomination should not be more than 100 Rupee note. Why do we earnestly require cash is to pay roadside vegitable vendor and like for that denominations of 10, 20, 50 and 100 are more than enough. Just started reading a book on Kindle app named 'brief introduction to Black Money' by Vaidyanathan. Also interesting to read is a chapter on India in the book 'Faultlines' by Raghuram Rajan which apparently written before this government formed.
HydroFuel is online now  
Old 13th September 2018, 18:26   #2724
BHPian
 
avira_tk's Avatar
 
Join Date: Nov 2011
Location: Bangalore
Posts: 932
Thanked: 1,269 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by HydroFuel View Post
All said and done what I feel that there should be slow backdoor demonetisation of 500 and 2000 notes. Maximum denomination should not be more than 100 Rupee note. Why do we earnestly require cash is to pay roadside vegitable vendor and like for that denominations of 10, 20, 50 and 100 are more than enough. Just started reading a book on Kindle app named 'brief introduction to Black Money' by Vaidyanathan. Also interesting to read is a chapter on India in the book 'Faultlines' by Raghuram Rajan which apparently written before this government formed.
You must be living in some sort of paradise where 100 rupees gets you vegetables. A half tank of diesel for a hatch costs around 2000 and you barely get change if you use a 500 note for buying vegetables/provisions. The current value of our currency means pretty soon we'll be having a 5k note, at least justification for having it.

Vaidyanathan's political bias will ensure that you find the book an eye opener, your post is a give away about your bias. A simple Google search leads to an article that looks like it's come straight out of the campaign material for the coming election. Cringe worthy stuff from a leading academic.
avira_tk is offline  
Old 13th September 2018, 19:06   #2725
Distinguished - BHPian
 
dark.knight's Avatar
 
Join Date: Apr 2013
Location: Beans Town
Posts: 1,640
Thanked: 5,988 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

If I'm allowed to, I shall attempt to bring this horribly swaying debate into some semblance of normalcy, provided each word that I type out is read and understood to be of a positive tone.. no sarcasm, mala fide, or condescension involved, whatsoever. This may also go off-topic but I think we needn't keep reminding each other of that.. if a post is off-topic it should merely be reported.

1) By nature, I'm a person who questions each and every action by the government (like many others here and outside of the forum).. it doesn't mean I have ill-will against the nation and it sure as hell doesn't mean that by merely disagreeing with popular perception, I or anyone else am/are sabotaging the nations progress. If anything it is the total and direct opposite.

2) Democracy means freedom of speech and expression.. yes by disagreeing with me or anyone else one also is expressing their democratic rights and I have never stopped that, often times I've not even responded to a counter-argument so that people may have their say and keep it.

3) Most of us countrymen today are speaking merely in terms of pure performance of the government, we do not care which party it is, who leads it, and where their sociological/religious/economic affinities lie. Merely by questioning, we do not become ingrates or pariahs.

4) We the public form the 1st half of what constitutes the country.. among us, have risen the very politicians and bureaucrats and we have put them there. Any government that proudly welcomes questioning and democratic audits instead of rejecting them and nearly criminalizing them, will be well appreciated by people.

5) Its a huge country, the population is bursting at its seams.. I/we get it, however when someone pays the taxes, it is important that there is some form of tangible return.. or to know what the government is doing with it at the very least at a time when the total rates of direct/indirect taxes have blown through the roof. Where ARE the good roads? Where are the aggressive laws that bring discipline in driving? Infrastructure is crumbling everywhere I've been to.. Mumbai, Delhi, Bangalore, Chennai, Pune, same story.

6) I personally am neutral to demonetization.. however I did find glib speeches of the same, with a spiel about how the corrupt shall cower in the shadows while a new dawn of economic reforms shall come forth, a bit outrageous. AGAIN, nothing personal or sour grapes or the like. Over time we have found out that the effects have been minimal if not completely absent.

7) I/we find no reason to again and again.. celebrate the fact that the government is flushed with funds, tax collection is high, etc etc.. unless we see visible changes of such "good fortune" so to speak. It takes time do I hear? Ok I cannot possibly give an answer to such a statement as time can be anywhere from 1 year to 1 century.

8) Each person is putting down personal experiences.. largely positive, and I guess they also need to understand that many of our opinions, positive or negative are backed by our experiences and what we've seen from people we know.

Its great to be a conformist, a patriot and an overall, textbook ideal citizen.. but cheekily enough, I feel we'd be making things too easy for the "rulers". I am inspired by First Amendment Auditors in America who continually prod and test the tolerances of government agencies and offices.. I am inspired by the fact that we are no longer living in a time where we just go to office, do our work, come back home and turn the tube and accept all the propaganda and brainwashing that comes through it. I consider this earth my home, not the country.. and if we need to make this a sustainable home economically, environmentally and ethically, debate is the only way forth, we need to question all that we see and not just come to foregone conclusions based on the quotidian "facts and figures" and "established facts" which would be used by the media solely to shut us up. Now is not the time for diatribe, but let the debate go on.

Happy Ganesh Chaturthi.. may wisdom and truth prevail.

Last edited by dark.knight : 13th September 2018 at 19:08.
dark.knight is offline  
Old 13th September 2018, 19:40   #2726
Senior - BHPian
 
longhorn's Avatar
 
Join Date: Nov 2009
Location: Chennai
Posts: 1,376
Thanked: 848 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by Nav-i-gator View Post
Govt has bought Gold recently, to negate the uncertainty in rupee vs dollar rates
It doesn't seem to have had any effect. The rupee is getting devalued even after all that gold was purchased. So much so that RBI had to intervene today to arrest the free fall.

Quote:
Originally Posted by Nav-i-gator View Post
I didn't say anything about GDP growth. However, basket of products (and services) used to calculate retail inflation is changed rather frequently. Last time, it was changed under previous Govt, if I remember correctly.

Having said that, it still is a "mystery" how all time high diesel prices has not affected retail inflation.
It was only changed under the current dispensation to fool the public. Actual inflation rate would be the current rate + 2 percentage points if the old system was followed. Hope the "mystery" is now solved.


Quote:
Originally Posted by Nav-i-gator View Post
So, you would conveniently choose the duration (2 days, 2 months or 4 years) to suit your argument. Fair, isn't it?
I chose the current scenario because I was talking about the impact of the rupee's freefall on the stock markets.

Quote:
Originally Posted by Nav-i-gator View Post
Yes it does. But not to the extent it has in the last 2 years (post DeMo).
Much of the so called excess is because people who held their savings in the form of cash at home over a period of time had to deposit lump sum amounts into their bank accounts during demonetisation. I personally know of a senior citizen who got a heart attack on hearing this announcement because he had 1 lakh in cash with him. Mind you, it was his savings and not a cut from a hawala deal. His son had to spend 1.5 lakh for his treatment during demo. Fortunately, the man survived.

Quote:
Originally Posted by Nav-i-gator View Post
As I said, this proves that DeMo failure is in fact our failure. We refuse to be honest
When you have a leader who neither has any remorse for the widescale damage his decision caused nor the decency to say yes we made a mistake, lets try to make amends and move on, it is not right to expect the citizens alone to be honest. In fact I feel like an idiot to be paying taxes right down to last pie even when some of it could be concealed. The man had been forewarned of possible misuse by the ex RBI governor, but his 56 inch ego got the better of him.



Quote:
Originally Posted by earthian View Post
You would know what really happened , wouldn't you?
It has been widely reported that the decision was taken by a one man army. All ministers after they were informed of the decision, were held captive in Parliament, till the man with the 56 inch chest made the announcement on national television. He wanted to take all the credit for was was his own making. Little did he know that night, that he would go on to prove right the words of the former PM - ' History will be kinder to me than the media'. I envy the foresight of the accidental PM.

Last edited by longhorn : 13th September 2018 at 20:08.
longhorn is offline  
Old 13th September 2018, 19:46   #2727
Senior - BHPian
 
msdivy's Avatar
 
Join Date: Aug 2006
Location: Bangalore
Posts: 1,643
Thanked: 1,768 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by Nav-i-gator View Post
As I said, this proves that DeMo failure is in fact our failure. We refuse to be honest
Blaming the failure of Govt finally on people . BTW, when people are honest, the judiciary can be scrapped throughout the world. Indians are no different from people from other countries. The difference is other countries Govt know the reality, plan better and execute better. For instance. China figured out Communism wasn't working in the 60s, 70s and switched to capitalism. DeMo is a concept tried by African or Central Amerian leaders. It is done a by lone ranger leadership, aka bollywood style hero.
Quote:
Originally Posted by HydroFuel View Post
All said and done what I feel that there should be slow backdoor demonetisation of 500 and 2000 notes. Maximum denomination should not be more than 100 Rupee note. Why do we earnestly require cash is to pay roadside vegitable vendor and like for that denomination of 10, 20, 50 and 100 are more than enough.
In some countries, the vending machines do not have coin or note slots. After purchase, the code in your phone is scanned by the vending machine and transaction is completed. None of those countries had anything close to DeMo. The point is, you don't need DeMo for a cashless economy. The people just need better incentive.

After finding the bitter truth, I am confident that another Demo won't even be attempted in Govt's dreams

Last edited by msdivy : 13th September 2018 at 19:56.
msdivy is online now  
Old 13th September 2018, 21:46   #2728
Distinguished - BHPian
 
Santoshbhat's Avatar
 
Join Date: May 2011
Location: Bangalore
Posts: 2,284
Thanked: 6,039 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

I have been a silent reader on this thread. I would like to post some insights from my perspective as an SME engaged in manufacture of industrial consumables.

Under VAT there was no incentive for B to B businesses to evade tax. Since tax on input was available as input credit there was no incentive to buy anything 'without bill' and since your customers also availed input credit they too wanted all their purchases from a VAT registered seller only. B to C is a different story. When a trader offers the consumer the option of buying without bill, there is a tangible saving for the consumer. Products which ended up at the B to C trade would see the maximum without bill, cash sale. A transaction on which no indirect tax and no direct tax is paid to the Govt. The entire value of such sale becomes black money in the hands of the receiver. I don't intend to blame the trader or the consumer alone for this. There is a chain that traces back to the manufacturers.

In our industry we have large MNCs, medium sized industries and localised small factories. Large corporations due to their size and systems do not indulge in any of this 'without bill' sales. Reason why we as a country should be happy if their sales grow. Medium sized companies that produce anything mostly have to purchase their raw materials from large corporations. No without bill purchase ensures that most of their sales is on the record. Since we are in the B to B space, percentage of tax evasion and parallel economy in our industry is very miniscule. But there is a small market which caters to labour contractors. Large companies outsource some jobs to contractors. So material goes out for job work to a contractor and comes back with some processing done. The contractor gives a labour bill for this. Some of these contractors consume our products. Most of these contractors are unorganised and do not mantain accounts. They buy in cash, get paid in cheque by their companies and slip under the radar of tax men since they have no PAN or TIN or anything to grab them by. Companies are aware of this , but they are happy to unload some tough jobs to these contractors as otherwise they would need to hire labour inside their factories and adhere to a host of labour laws and minimum wage laws. These contractors would always ask for material 'without bill'. Large and medium sized companies would find it difficult to tap this market since, the smaller ones would be happy to sell to these guys without bill. By buying without bill, the saving was close to 18% (12.50% excise duty + 5.50% VAT). Many small factories thrived on this tax arbitrage.

When DeMo was announced, it broke the back of this parallel economy.
  • The buyers had no cash to pay for goods.
  • The sellers who had accumulated cash were busy finding ways to salvage their wealth
  • Few large contractors who were organised and did business by the book were suddenly flooded with orders.

Some of these small companies which thrived on tax evasion were in a lot of trouble whereas other small industries that believed in doing business by the book saw a turning point in their businesses.

But a few months later things seemed to go back to the way it was before. Once cash came into people's hands there was an incentive to play the same game again. But there was a lurking fear among these businessmen. "This Govt. will make our life hell. Building our castles with black money brought us crashing down. All that we worked for and earned got washed away. We don't want to get into that situation again" seemed to be the sentiment among the parallel economy operators.

After DeMo came GST. GST has been the game changer according to me. More than DeMo , it is GST that has forced the parallel economy to come into the mainstream. Once GST was introduced, almost all business entities started insisting on a GST bill. GST bill for material and GST bill for services including labour contracts. Now these labour contractors were forced to register under GST in order to save their contracts.

I am not a supporter of DeMo. I think it was a bad idea. It was gutsy and a brave move. It failed because it wasn't thought through. The PM hoped that cash hoarders would be forced to dump cash into rivers giving the Govt. a large dividend. He failed to account for the fact that this was hard cash. Even if they could salvage 5% of it, nobody would let go of it. Converters and middlemen with the help of unscrupulous bankers got into the act and saw to it that all old notes were converted for a price. A few days after DeMo so many labourers rushed to their villages and constituencies and came back with stories of how they converted cash for 25 to 30% commission. Atleast DeMo gave these poor people an opportunity to earn something! The big fish lost 25 to 30% in the process which got distributed among the middlemen and willing converters. The black cash just got redistributed and the Govt. got nothing to show for it.

Overall I see a cultural change coming about in people. There is a great resistance among our businessmen and traders to pay taxes. DeMo and GST has forced them to think differently. They now see cash as a burden. Accumulating cash doesn't serve much purpose with lots of restrictions on cash transactions and the fact that the taxman these days is equipped with all these digital tools.

I am waiting to see this year's final direct tax collection numbers after all tax audit cases file their returns (last date is 30th Sep). I hope we see a big jump in direct tax collections.

Last edited by Santoshbhat : 13th September 2018 at 21:52.
Santoshbhat is online now  
Old 13th September 2018, 22:00   #2729
Distinguished - BHPian
 
Join Date: Aug 2014
Location: Delhi-NCR
Posts: 2,411
Thanked: 21,073 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Quote:
Originally Posted by Santoshbhat View Post
I have been a silent reader on this thread. I would like to post some insights from my perspective as an SME engaged in manufacture of industrial consumables.
Overall I see a cultural change coming about in people. There is a great resistance among our businessmen and traders to pay taxes. DeMo and GST has forced them to think differently. They now see cash as a burden. Accumulating cash doesn't serve much purpose with lots of restrictions on cash transactions and the fact that the taxman these days is equipped with all these digital tools.

I am waiting to see this year's final direct tax collection numbers after all tax audit cases file their returns (last date is 30th Sep). I hope we see a big jump in direct tax collections.
Dear Santoshbhat, brilliant post. Thank you. As a medium scale businessman (till very recently) my experience on the ground with GST and the caution it has driven is exactly the same. GST plus the digitization, [Aadhar et al] is compelling the small and medium trader to reorganize the way he does business. He doesn't like it but the change is in the air. There is of course a lot still for this and the next Govt to do but all that is for debate on a different thread. Folks like you and me don't have to read journalist views on GST, its contribution and its administrative challenges - we live it each day.
V.Narayan is offline  
Old 13th September 2018, 22:08   #2730
JLS
BHPian
 
JLS's Avatar
 
Join Date: Nov 2009
Location: Ahmedabad
Posts: 144
Thanked: 130 Times
Default Re: Government scraps Rs 500 and Rs 1000 notes!

Arguments are being exchanged to and fro about tax coverage and the amount collected - can somebody provide a link to RBI site where there is a concrete information - that can be referred?
Similarly is there any reference site where one can check what was in inflation rate, what was the formula used, when was that changed and what new products and services were brought in/excluded.
These details will bring objectivity to the discussion.
JLS is online now  
Reply

Most Viewed
Thread Tools Search this Thread
Search this Thread:

Advanced Search

Copyright 2000 - 2020, Team-BHP.com
Proudly powered by E2E Networks