Business

India cancels registration of over 100,000 companies in fight against tax evasion

NEW DELHI India has cancelled the registration of more than 100,000 companies that were "in violation of laws", Prime Minister Narendra Modi said, in the latest effort against "black money" and tax evasion.

The decision was made based on an extensive data analysis conducted by the government after Mr Modi in November last year announced a ban on high-value currency banknotes.

More than 300,000 companies had come under the scanner for irregular transactions following the banknote ban, and licences of more than 100,000 companies had been cancelled, Mr Modi said.

"Further stern measures will be taken in the coming days against companies which are violating the law," he said late on Saturday while addressing a gathering of accountants, hours after launching the country's landmark sales tax reform

The government will also take action against more than 37,000 identified "shell companies" which were found to be engaged in illegal transactions, Reuters reported.

"The ones who have looted the poor, will have to return to the poor," Mr Modi said.

India has also vowed that a new nationwide tax will revolutionise the economy by bringing more businesses into the digital system to enrich state coffers, but for shopkeeper Sanjay Kumar Rai, who has never used a computer, the transition is terrifying.

He is one of tens of thousands of small traders fearful of the goods and services tax (GST) launched on Saturday that aims to create a single market in place of a labyrinthine system of more than a dozen national and state levies, AFP reported.

Under the new regime, businesses will have to register with the GST network and file invoices and tax returns online at least once a month.

Mr Modi has compared the changes to getting used to a new pair of spectacles. But India's army of small business owners like Mr Rai are in a digital panic.

In theory, traders like Mr Rai with annual revenues of less than 2 million rupees (S$42,600) do not need to register on the GST network.

But bigger clients that buy from him want suppliers to be in the system or they will go elsewhere. The government is pressing for proof of all sales so it can go after tax cheats.

Analysts said the GST has been set up to force compliance in a country with a poor tax base and a reputation for avoidance.

"It is a clever system design," Credit Suisse managing director Neelkanth Mishra told AFP.

"There will be an automatic compliance upstream because it's up to the companies to ensure that all their suppliers are GST compliant."

Thousands of traders across the country closed their shutters on the day before the launch to protest against the tax.

Mr Vijay Prakash Jain, secretary general of the Bhartiya Udyog Vyapar Mandal, a national traders association, was among those supporting the strike.

"The rules and regulations are complicated and hard-hitting and we, especially small businesses, can never comply," he told AFP. "Less than 2 per cent of the country's 60 million traders may have computers. Where is a small trader going to get a computer from?"

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