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  1. Tax sops, other incentives proposed to boost e-transactions

Tax sops, other incentives proposed to boost e-transactions

To discourage transactions in cash and thereby curb black money, the government is considering giving incentives to electronic transactions...

By: | New Delhi | Updated: June 18, 2015 2:04 AM
Ecommerce wage hike

The finance ministry on Wednesday put up the draft proposals for facilitating electronic transactions and asked the public to comment on the same by June 29.

To discourage transactions in cash and thereby curb black money, the government is considering giving incentives to electronic transactions in the form of tax rebates, waiver of charges on card payments such as purchase of rail tickets and discounts on utility bill payments.

The finance ministry on Wednesday put up the draft proposals for facilitating electronic transactions and asked the public to comment on the same by June 29. In his Budget speech in February, finance minister Arun Jaitley had proposed to introduce measures that would incentivise credit or debit card transactions and disincentivise cash transactions.

To promote wider adoption of e-transactions, the government has proposed income tax rebates to end consumers for paying a certain proportion of their expenditure through electronic means. The amount of rebate hasn’t been mentioned. Merchants could get tax rebate if at least , say 50%, value of the transactions is through electronic means or alternatively, a 1-2% reduction in value added tax could be given for all electronic transactions by the merchants, according to the draft.

It also suggests to increase the threshold to Rs 5 lakh from Rs 2 lakh in a year for reporting of aggregate credit card transactions to tax authorities.

In a move that would reduce cost of services to citizens, it proposes policy intervention to waive convenience fee/service charge/surcharge levied by government entities on card payments to utility service providers, petrol pumps, gas agencies and railway tickets. It is also considering to advise utility service providers to give discounts to consumers for making e-payments like a 1% discount given by BSNL for online payment telephone bills.

To disincentivise cash transactions, the government could mandate settling all high value transactions above one lakh rupees though electronic means and impose a levy a nominal cash handling charge beyond a threshold.

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For creating an enabling environment for e-transactions, the draft proposes to mandate banks to deploy Point of Sale terminals as a ratio to debit/credit cards issued by them. It also favours rationalisation of charges levied by telecom companies on mobile banking/payment channels.

With most households now connected to formal banking channels and access to government-supported RuPay debit cards, the government was hopeful that the e-transactions objective could be achieved.

According to a report on ‘Cost of Cash in India’ by MasterCard, the Reserve Bank of India and commercial banks annually spend around $3.5 billion in currency operations. According to the report, India is among the most cash-intensive economies in the world with a cash-to-GDP ratio of 12%, as compared to Brazil (3.9%), Mexico (5.3%) and South Africa (3.7%).

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