Catch-22 Situation for MSME Sector with Rs 2,000 Withdrawal
By Republic World | Mon May 22 2023
It's akin to being between a rock and a hard place for those in the manufacturing sector who may have evaded sales disclosures by taking the cash route. If they want to submit their accumulated cash, they may finally have to face the tax net.
"Cash transactions in manufacturing industry is present in bulk buy and sale. Many indulge in it and not all sales are disclosed. Now they will have no choice but to disclose their wealth at the banks. And if their deposits are in big amounts, the tax man will obviously find them," Kulmani Gupta, vice president, Indian Manufacturer's Association (IMA) told Republic.
The Reserve Bank of India today announced that banks would start exchanging Rs 2,000 notes from May 23. Individuals can exchange up to Rs 20,000 or 10 notes at a time.
"It is surprising if people are still transacting in cash. And if they are, they will fall under the tax net obviously, but most exporters are clean in their transactions that way and if anyone has avoided taxes, will finally be accountable now," Rajiv Bansal, President, India Industries Association (IIA) said.
The RBI withdrew Rs 2,000 from circulation on Friday though it currently remains legal tender. People have been given four months to exchange their currency. The last date set for the exchange is September 30.