Demonetisation, GST will fetch more revenues to government, says Arun Jaitley

Finance Minister Arun Jaitley, while defending the demonetisation drive, said that it "shook" the financial system for a short while, but will integrate the shadow economy with the formal in the long run and ensure better tax compliance.

"The size of the formal economy is expanding, so are the transactions in the banking system and through the digital mode," he said.

He said that issues regarding the Goods and Services Tax (GST) have been sorted out between the Centre and states and finally the new indirect tax regime is at the final stages of implementation.

"This (demonetisation), coupled with GST, in the days to come will ensure much larger revenues as far as states and the central government are concerned and expand the size as far as the formal economy is concerned," Jaitley said at the CII Partnership Summit.

He also said that India is largely a tax non-compliant society and due to that states and the central government has struggled with their revenues to run the system and this further led to an unfair enrichment in favour of the evader.

"It also becomes very unfair on the normal taxpayer because what the evader manages to evade is what the compliant has to pay more," Jaitley said.

As for the implementation of GST, the finance minister said new indirect tax regime will make India one single market, eliminate multiple assessments, check evasion and bring more revenues into the system.

"I am glad that almost all state governments have actively co-operated in making this a reality. Most of the contentious issues have been sorted out in the GST Council, a forum where you will see deliberative democracy in action. Those are now at final stages of implementation," Jaitley said.