Banking tax to continue to curb money laundering
The Banking Cash Transaction Tax (BCTT), imposed last year, will continue as it helped the government curb tax evasion and prevent generation and laundering of black money worth Rs.1,500 crore through banking channels. In his budget speech in parliament on February 28, Finance Minister P. Chidambaram said: "The tax turned out to be a boon, not for the modest revenues it brought which was never its purpose but for the remarkable trails it has helped establish."
He cited an instance whereby the imposition of the tax led to the unearthing of a huge money-laundering racket.
Chidambaram said huge cash withdrawals at a bank branch at Chandni Chowk in Delhi, noticed through BCTT, led the tax department to three entities that were carrying on the business of purchasing demand drafts from traders at a discount and helping the traders avoid paying sales tax and income tax.
"These entities would deposit the demand drafts in their own account and withdraw the cash," he said, noting that in a period of 18 months, the entities had laundered Rs.1,500 crore (Rs.15 billion).
BCTT has also helped the government to detect bogus bills, accommodation entries, artificial loss claims and dummy firms.
BCTT was introduced by the Finance Act, with effect from June 1, 2005, and applied to the whole of India except the state of Jammu and Kashmir.
Chidamabram's announcement about the imposition this tax during last year's budget had invited a lot of flak from various quarters.