A month after it revoked the legal tender character of specified series of banknotes — all of Rs 500 and Rs 1,000 denominations — and in view of the resultant persistent pain to people at large and undermining of economic activities, the government on...
A month after it revoked the legal tender character of specified series of banknotes — all of Rs 500 and Rs 1,000 denominations — and in view of the resultant persistent pain to people at large and undermining of economic activities, the government on Thursday sought to hasten the shift to a less-cash economy, by unveiling several incentives for digital transactions. Pay digitally and one would get discounts on purchase of fuel, railway services as also for payment of highway tolls and insurance premiums. Also, settlement services rendered by banks for any single transaction up to Rs 2,000 will be exempt from tax if the payment is done via credit card, debit card or other payment card service.
Announcing these steps, finance minister Arun Jaitley said: “Dealing with cash has its own economic costs, which is why the government is promoting payments by credit cards, debit cards and e-wallets.” Earlier in the day, as the logjam in Parliament over demonetisation continued for the 16th day, President Pranab Mukherjee exhorted the members of both Houses to refrain from disruptive behaviour, which is “totally unacceptable in the Parliamentary system”. “For God’s sake, do your job,” he told them.
Listing incentives for cashless payments, Jaitley said those paying by card or other digital means for petrol and diesel at PSU retailers’ outlets would be rewarded with 0.75% discount on purchases. Post-demonetisation, digital payments at petrol pumps have risen to 40% of transactions from 20% earlier, he said. “The incentive scheme has the potential of shifting at least 30% more customer to digital means, which will further reduce the cash requirement of nearly R2 lakh crore per year at the petrol pumps,” Jaitley said. The daily requirement of cash at fuel outlets has already declined by R360 crore per day. About 4.5 crore people purchase fuel at petrol pumps, amounting to R1,800 crore a day.
Nearly 80 lakh commuters using suburban railway networks could now avail 0.5% discount on monthly/seasonal tickets purchased through non-cash means such as debit/credit cards or online payment. This incentive would be rolled out in the Mumbai suburban network on January 1, and extended to other places thereafter. The railways would also give a 5% discount to passengers e-paying for services like catering, accommodation, etc. The national transporter would also give R10 lakh accident insurance cover for free to all passengers travelling on tickets bought online. Currently, 58% of railways ticket bookings are done online by passengers.
Besides the railways, public sector general insurance companies would give up to 10% discount/credit on premiums if a new policy is purchased from customer portals of state-run general insurers.
Such incentive would be 8% on e-purchase of policies from PSU life insurers.
Similarly, users would get a 10% discount at toll plazas on national highways for using RFID card/Fast Tags for making payments till March 31, 2017. All these incentives would be provided by either the government or PSUs and no end-date has been announced. Most of these benefits would be available immediately while some would take effect after a few days or weeks, Jaitley said.
The waiver of service tax on banks’ settlement services for card payments up to Rs 2,000 a time will encourage merchants — who bear the cost of the 15% service tax on the fees charged by banks — to accept payments via cards, analysts said.
To expand digital payment infrastructure in rural areas, the Nabard would extend financial support to eligible banks for deployment of two point of sale devices each in 1 lakh villages with populations of less than 10,000.
These PoS machines are intended to be deployed at primary cooperative societies/milk societies/agricultural input dealers. This would benefit nearly 75 crore people in rural areas, the minister said.
Rural regional banks and cooperative banks have been asked to issue RuPay kisan cards to 4.32 crore kisan credit card holders to enable them to make digital transactions at PoS machines/micro ATMs/ATMs to reduce dependence on cash.
Jaitley said central government departments and PSUs would ensure that transactions fee/merchant discount rate charges associated with payment through digital means were not passed on to the consumers and all such expenses would be borne by them.
State governments are also being advised to take similar steps.
Public sector banks were advised that merchants not be charged more than Rs 100 per month as rental for PoS terminals/micro ATMs/mobile PoS. PSBs have already issued nearly 6.5 lakh machines to merchants.