cash only

A government panel has suggested that cash usage in the country be charged in order to encourage people to adopt digital means of payments, reports the Economic Times. A government committee headed Ratan Watal,  principal advisor, NITI Aayog submitted a report to finance minister Arun Jaitley last week detailing strategies to push digital transactions, according to this PIB release.

The Economic Times added that the committee suggested a 30-90 days’ timeline for implementing a number of measures that it hopes can cut in half India’s cash usage from 12% of GDP in three years. The committee pitched for greater use of Aadhaar and mobile numbers for making digital payments as easy as cash. The report  proposed a fund called DIPAYAN from savings generated from cashless transactions expand digital payments.

Note if this proposal is implemented, the government will ensure every form of transaction is charged. While it claims that it claims that that it is to help people wean away from cash,  the ground reality is that this is not the case and merchants and shopkeepers frequently charge extra if it is a digital from of payment.

Last week, NITI Aayog launched a series of incentives for encouraging digital payments for day to day financial transactions like buying or selling goods/services, transferring money etc., at the district, taluk and panchayat level, while various banks have sped up the adoption of the Unified Payments Interface (UPI), and other means to encourage digital payments.

More significantly, to boost usage of debit and credit cards for small value transactions, the government waived off service tax for transactions up to Rs 2,000Note that this exemption applies only to the Merchant Discount Rate (MDR) which banks levy on merchants and not on the whole Rs 2,000. This might mean that banks will pass on the benefit of the service tax exemption to merchants and lower the MDR.

Government has also removed excise duty on the import of goods for the manufacturing of POS  machines.

Encouragement of use of digital payments in government undertakings

-Central government departments and public sector undertakings have to ensure that the transaction fees and MDR associated with digital payments need to absorbed and should  not be passed on to consumers.

– Government Petroleum PSUs will offer a discount of 0.75% of the sale price to consumers on purchase of petrol and diesel if payment is made through digital means.

– Railways, through its sub urban railway network, shall provide a discount up to 0.5% to customers for monthly or seasonal tickets from January 1, 2017, if payment is made through digital means.

–  For the payment of toll at Toll Plazas on National Highways using RFID card/Fast Tags, a discount of 10% will be available to users in the year 2016-17