During his budget speech in Parliament on February 28, Union Finance Minister Arun Jaitley had said that "one way to curb the flow of black money is to discourage transactions in cash". And in the same breath, the minister had said that the government would soon introduce measures that would "incentivise credit or debit card transactions and de-incentivise cash transaction".
Walking the talk, the Finance Ministry has prepared a draft proposal, declaring several incentives for those who go cashless, carrying out transactions using their debit or credit cards.
And going by the proposal of the ministry, it doesn't appear to be a bad bet to do away with frequent ATM visits and carrying bulkier wallets.
While the government has taken care of the consumers while preparing the draft proposal, it has also included incentives aimed at encouraging merchants to move towards acceptance of cashless payment mode.
While the proposal bats for income tax benefits for those who pay through cards, it also talks about giving tax benefits to merchants for accepting card payment.
According to the draft proposal available on the Union Finance Ministry website, "Tax benefits could be provided to merchants for accepting electronic payments, e.g. an appropriate tax rebate can be extended to a merchant if at least say 50 per cent value of the transactions is through electronic means. Alternatively, 1-2 per cent reduction in value added tax could be considered on all electronic transactions by the merchants."
In another benefit for them, the government is also looking at reduction in the Merchant Discount Rate, which is the rate charged to a merchant by a bank for providing debit and credit card services.
"At present, there is a Merchant Discount Rate (MDR) of 0.75 per cent on Debit Card transactions upto Rs 2000 and 1 per cent on all transactions above Rs 2000. The possibility of reduction in the MDR and the rationalisation of the distribution of the MDR across different stakeholders will be examined," says the draft.
Another issue that bothers us while carrying out transactions through cards are the surcharges and convenience fee at petrol pumps, gas agencies or railway ticket payment gateways. In a welcome move, the government is also mulling removal of these surcharges on e-services.
Apart from these, some discounts are also on cards to encourage cashless transaction, on the lines of a practice already in place with BSNL.
As per the draft, "utility service providers could be advised to give a discount to users for small ticket payments through E-payments, on the lines of BSNL, which provides an incentive of 1 per cent of the billed amount if the payment is done through electronic mode".
The draft proposal for facilitating electronic transaction certainly caters to all stakeholders, from the consumer to the merchant, and even the banks. It is quite a prevalent practice in several countries like Belgium, France, Canada and United Kingdom where cashless payments account for over 80-90 per cent of the total value of consumer payments.
Going by the proposals made by the Union Finance Ministry, it is certainly aimed at getting a more concrete account of the transactions done by citizens. Moreover, it would add to our convenience as there would not be much need for us to hop from one ATM to another, and avail the convenience of carrying out even our basic and essential transactions through cards, and not cash.
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