Aiming to boost digital payments, the government on Monday proposed tax benefits to merchants for accepting electronic payments and income tax rebates to consumers for paying a certain proportion of their expenditure through electronic means.
“An appropriate tax rebate can be extended to a merchant if at least say 50% value of the transactions is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by the merchants,” the finance ministry said in the ‘Draft Proposals For Facilitating Electronic Transactions’.
The ministry has also proposed mandating settling of high value transactions of, say more than R1 lakh, only by electronic means.
In other measures to promote wider adoption of e-transactions, the ministry proposed reduction in the Merchant Discount Rate (MDR) and the rationalisation of the distribution of the MDR across different stakeholders. At present, there is an MDR of 0.75% on debit card transactions up to Rs 2,000 and 1% on all transactions above Rs 2,000. FE had, on February 16, reported that these initiatives are being planned by the government.
To enable policy for e-transactions in government collections, the draft proposals said the feasibility of removing the prevailing convenience fee/service charge/surcharge levied by government departments /Central PSUs/organisations for making e-transactions (card payments) to essential commodities, utility service providers, petrol pumps, gas agencies and railway ticket counter/IRCTC.
The ministry pointed out that finance minister Arun Jaitley in his budget speech for 2015-16 had said, “One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians have or can have a RUPAY debit card, I, therefore, propose to introduce soon several measures that will incentivise credit or debit card transactions and disincentivise cash transaction”.
It said the comments/suggestions are invited on the draft text which can be accessed through http://mygov.nic.in, adding that the last date for the stakeholders and the general public to share views is June 29. The ministry specified that the proposals as they stand at this stage, do not imply any commitment from the government.
The draft said utility service providers could be advised to give a discount to users for small ticket payments through e-payments, on the lines of BSNL, which provides an incentive of 1% of the billed amount if the payment is done through electronic mode.