Govt planning 2% GST relief on E-payments

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 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 Prime Minister Narendra Modi himself, prompting various departments of the government to go on overdrive and facilitate their greater acceptance.

Addressing the nation on the 71st Independence Day, Modi had asked people, especially the youth, to use less cash. "The world's largest population of youth is in India...This is the age of information technology. So, we should move ahead in the direction of digital transactions," Modi had said.

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 also facilitating the entry of more people within the formal economy.This will help plug in 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 and all these issues will be worked out as we move forward on the proposal."

Apart from the 2% relief on smaller transactions, the government is also considering other initiatives to push the adoption of digital payments and 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 latest steps to boost digital payments come at a time when there has been a fall in the number of 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.