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Government mulling 2 per cent relief on GST for digital payments

You may soon need to shell out less if you pay digitally. The government is looking at giving a 2% incentive over the applicable GST tax rate in case of digital payments where the bill is up to Rs 2,000, in a move aimed at discouraging cash payments.

According to sources, the proposal – which may give the benefit in the form of a discount or cash-back – is being discussed between the finance ministry, RBI, cabinet secretariat and ministry of electronics and IT.

“The idea is to incentivise all kinds of digital payments, especially smaller transactions, in line with the government’s plan of making India a less-cash economy,” a source told TOI. The IT ministry is leading the government’s efforts on digital payments and has been taking stock of initiatives to further popularise electronic payments.

A recent meeting analysed digital payment transactions post demonetisation last November. It was attended by IT minister Ravi Shankar Prasad and senior officials from other wings of the government, including the finance ministry and the cabinet secretary’s office. The need to boost digital payments has been raised by PM Modi himself, prompting various departments of the government to facilitate their greater acceptance.

Addressing the nation on the 71st Independence Day, Modi had asked people to use less cash. The source said the relief is being mooted for “smaller transactions” as these are large in numbers and are mostly preferred through the cash mode.

“Transactions of up to Rs 2,000 are very high in volumes and if an incentive can be given here, it will provide an impetus to digital payments while facilitating the entry of more people within the formal economy.

This will help plug leakages while playing a credible part in countering the development of black money.” The source, however, said it is not yet clear what route the government will suggest for providing the 2% incentive. “The matter is with the finance ministry.”

The government is also considering other initiatives to push digital transactions. “There will be new measures that will be announced on this front in the coming time to strengthen the government’s resolve on the electronics payment front,” the source said.

The steps come at a time when there has been a fall in electronic transactions over the past few months. While they had picked up massively till March this year, the volumes have been coming down thereafter as the availability of cash went up.

As per the RBI, the number of electronic transactions went up from 67 crore in November last year to a peak of 89 crore in March this year. However, only 84 transactions were recorded in June

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