Among other proposals, the paper has suggested shopkeepers be given a tax rebate if they accept a significant value of sales through debit or credit cards. “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, one-two per cent reduction in value-added tax could be considered on all electronic transactions by merchants,” it says.
Income tax rebates might be considered for consumers who pay a proportion of their expenditure through electronic means, it added.
The proposals are aimed at building a transactions history of individuals to enable improved credit access and financial inclusion, reduce tax avoidance and check counterfeiting of currency.
In the 2015-16 Budget, Finance Minister Arun Jaitley had said: “One way to curb the flow of black money is to discourage transactions in cash. Now, a majority of Indians have or can have a RuPay debit card... I propose to soon introduce several measures that will incentivise credit or debit card transactions and disincentivise cash transactions.”
The draft proposals were prepared after consultations with various stakeholders, including the central bank, the National Payments Corporation of India, public and private sector banks, card service providers, mobile service providers, research institutions and various government departments.
The draft made a case for removing different types of fees and charges on e-transactions by various entities and providing incentives for such payments. Observing that public sector undertakings and government departments levied a convenience fee for making e-transactions to utility service providers, petrol pumps, gas agencies and railway tickets, it said, “The feasibility of removing the charges will be examined.
“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 one per cent of the billed amount if the payment is through electronic mode.” To promote wider adoption of e-transactions, it suggested rationalisation of the merchant discount rate, which is 0.75 per cent on debit card transactions of up to Rs 2,000 and one per cent on transactions worth more than that.
“The existing inter-change fees on card transactions are not uniform and need to be standardised to encourage both issuing and acquiring banks to establish and utilise acceptance infrastructure,” it said. A nominal cash-handling charge on transactions greater than a specified level might be levied, it added.
The draft also proposes to relax the norms for reporting credit card transactions of individuals by banks. “At present, banks have to report the aggregate of all the payments made by a credit cardholder as one transaction, if such an amount is Rs 2 lakh a year. To facilitate high-value transactions, the ceiling of Rs 2 lakh could be increased to, say, Rs 5 lakh or more.” Government departments, it said, should also consider introducing appropriate acceptance infrastructure or adopting the national e-payment gateway, PayGov India, for collection of revenue, fee and penalties.