PM Narendra Modi says more Indians paying tax after cash ban and GST rollout

A man holding a placard during a rally to support implementation of the Goods and Services Tax (GST) in Mumbai, India, on June 30, 2017.
A man holding a placard during a rally to support implementation of the Goods and Services Tax (GST) in Mumbai, India, on June 30, 2017. PHOTO: REUTERS

NEW DELHI (BLOOMBERG) - The number of new taxpayers in India more than doubled in the past five months and about 3 trillion rupees (S$64 billion) came back to the banks after the government's cash ban brought more people into the fold of the formal economy, Prime Minister Narendra Modi said.

"Black money which was hidden was forced to come to the mainstream," Mr Modi said in his Independence Day address at the Red Fort in New Delhi. "100,000 people who had never heard of, or paid, income tax have been forced to do it."

Vowing to continue the crackdown on unaccounted wealth, Mr Modi said more than 2 trillion rupees has reached banks after the government withdrew high-value currency notes in November, and deposits of 1.75 trillion rupees are under scrutiny.

The introduction of the landmark national sales tax on July 1 will further boost transparency, Mr Modi said.

New tax filings have more than doubled to 5.6 million between April 1 and Aug 5, from 2.2 million a year earlier, Mr Modi said. The government has identified 1.8 million people whose assets exceed their declared sources of income, and 450,000 of them have come clean and have sought to pay up, he said.

Mr Modi, who swept to power in 2014 on promise to eliminate unaccounted cash, can count the currency clampdown and the July 1 launch of a nationwide goods and services tax - the biggest tax reform since independence in 1947 - among his biggest policy decisions.

While demand is still recovering from demonetisation, there are indications that the nation's vast shadow economy, which makes up for an estimated half of India's gross domestic product, has been hurt by both the cash ban as well as the introduction of the sales tax.