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Finance ministry considering tax rebates for debit and credit card transactions

In a bid to boost transactions using debit cards and credit cards, the finance ministry is mulling providing tax benefits to merchants for accepting electronic payments. According to a draft proposal (pdf), the ministry is considering extending a tax rebate 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 ministry added. The ministry is also considering income tax rebates for consumers who for paying a certain proportion of their expenditure through electronic means and levying of a nominal cash handling charge on transactions greater than a specified level.  The government also suggested rationalisation of the Merchant Discount Rate (MDR), which at present is 0.75% on Debit Card transactions of up to Rs 2,000 and 1% on all transactions above it. “The existing inter-change fee on Debit/Credit Card transactions are not uniform and need to be standardised/ rationalised to encourage both issuing and acquiring banks to establish and utilise acceptance infrastructure,” it said. The ministry also said that government departments should consider introduction of appropriate acceptance infrastructure or adopt national E-payment gateway ‘PayGov India’ for collection of revenue, fee and penalties etc. POS Terminals Noting the low penetration of point-of-sale  (POS) terminals in the country, the ministry also proposed that  non-banks institutions could be authorized to install white label POS terminals. There are only two companies in India which are prominent  players in the POS terminals market: Verifone and Ingenico. India…

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