Date:05/04/2005 URL: http://www.thehindubusinessline.com/2005/04/05/stories/2005040501540600.htm

Back FICCI seeks withdrawal of banking cash transaction tax

Our Bureau

New Delhi , April 4

THE Federation of Indian Chambers of Commerce and Industry has called for withdrawal of the proposed banking cash transaction tax (BCTT).

The Budget proposes to levy a BCTT at the rate of 0.1 per cent on the value of transactions as specified in the Bill. One of such transactions includes withdrawal of cash exceeding Rs 10,000 on any single day by a person from any scheduled bank. In its memorandum on the Budget proposals of 2005-06, the Chamber said that this levy would impose a huge compliance burden on banks and it was not clear as to how it would help in achieving its objective of curbing or tracking black money.

FICCI pointed out that since all high-value transactions are to be supported by Permanent Account Number (PAN), a further regimentation is totally uncalled for. Further, when there is already a Money Laundering Act and other checks and balances in place, where is the question of taxing every transaction of Rs 10,000 or more, the Chamber stated.

"There is certainly a mismatch in the objective and the modus operandi for achieving it," FICCI said.

Besides, the Income-Tax Act recognises certain circumstances and cases where cash payment may be unavoidable having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. While sharing the concern of the Government for curbing or tracking black money, the proposed anti-tax avoidance measure of levying BCTT, the Chamber felt, may not serve the intended objective.

The objective perhaps, could be better achieved by effectively utilising the information about financial transactions provided by banks and other authorities, FICCI said. "However, in case this tax has to be retained, then the scope should be narrowed down considerably. This levy should be made applicable only in those cases where people buy drafts from banks without quoting their PAN identification. All other assessees should be outside the purview of this levy," the Chamber said.