Successful demonetisation will help in raising revenues on sustained basis as more and more people will come under the tax net, says a World Bank report.
During 2016-17, India generated additional tax revenues as unreported cash identified both through the amnesty scheme and demonetisation were brought under the tax net.
Gross tax revenue, including states’ share, surpassed budgeted target (of 10.8 per cent) at 11.3 per cent, which was mostly due to higher-than-expected excise collections on petroleum products.
Even though, demonetisation had only a neutral effect on direct taxes, which fell within the budgeted target of 5.6 per cent of the gross domestic product (GDP), it said.
“Going forward revenues may increase permanently if demonetisation is successful in raising the amount of income reported to tax authorities,” World Bank said in a chapter titled ‘India’s Great Currency Exchange’ in its latest ‘India Development Update’.