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Digital payment execs met Finance Ministry officials to discuss demerits of removing MDR: report

Five representatives from the digital payment industry reportedly met the officials of the Finance ministry last week and discussed challenges on the removal of merchant discount rate —  charges on digital payments —, according to Economic Times. Citing sources, the report said that the industry is yet to get assurance from the government about the rollback of the measure. The proposal for withdrawing merchant discount rate was first announced by Finance Minister Nirmala Sitharaman during the Budget 2019. She said that the Payment and Settlement Systems Act, 2007 and Income Tax Act, 1961 will be amended to allow this rule. In her maiden budget speech, Sitharaman said that all businesses with an annual turnover of more than ₹50 crore will have to offer digital payment modes, and that such merchants will not be charged MDR, which is typically around 1.5-2%. She said that the RBI and banks would bear this cost “from the savings that will accrue to them on account of handling less cash”. Prior to the budget announcement, the government was subsidising MDR on low-value digital transactions, that is, ₹2,000 or under. According to the ET sources, several lakh people employed in the sector may lose jobs due to this measure. They also said that this measure may reduce the foreign direct investment in the fintech space. The sources explained that withdrawing merchant discount rate may amount to a loss of Rs 2,000 crore GST. The measure which was introduced to increase the acceptance of digital payments might actually have a negative impact on…

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