Tax cash transactions, Committee tells Govt; Finance Ministry says no final view yet
The Committee of Chief Ministers on Digital Payments led by Chief Minister of Andhra Pradesh Chandrababu Naidu submitted their interim report to Prime Minister Narendra Modi on Tuesday January 24, 2017.
The interim report stated that Ministry of Finance and Reserve Bank of India (RBI) must take action to make Aadhaar a primary KYC (Know Your Customer) identification to promote adoption of digital payments. It said that Section 57 of the Aadhaar Act can be applied in this regards apart from amendment to PMLA rules.
Finance Ministry, in a statement said that the Government has not yet taken any final view on the recommendations of the Committee. It said, "The Recommendations of the Committee will be carefully examined and appropriate decisions will be taken in due course."
The interim report further said that that a banking cash transaction tax (BCCT) on transactions of Rs 50,000 and above could be applied to curb large transactions in cash.
Bipin Preet Singh, Founder & CEO, MobiKwik said, "Tax benefits on digital transactions will ensure nationwide adoption and make digital payments accessible to the masses. Further, these recommendations will create a demand for cashless payments."
The interim report suggested that the Government should lower or remove MDR charges on digital payments to Government entities. "All government sections like insurance, educational institutes, fertilisers, PDS, Petroleum etc to switch to digital payments," it said.
Lastly, the interim report suggested the Government to consider cap on maximum allowable limit of cash in all types of large ticket size transactions.
The report highlighted need to formulate an incentive structure to make digital payments more attractive than cash.
Relief in prospective taxes for encouraging merchants to accept digital payments & no retrospective taxation to Merchants doing digital transactions
Tax incentives to be extended to Micro ATMs, Biometric Sensors etc. Domestic production to be encouraged
Tax refund for consumers using digital payment upto a certain proportion of annual income
For Aadhaar Pay, Biometric (FP & Iris) sensors to be provided at 50% subsidy to all merchant points
AEPS to be promoted by incentivising & not charging MDR
The report stated that India currently at near bottom of a list of countries with non-cash payments transactions by non-banks per capita per annum.
It said that only 11 non-cash payments transactions by non-banks per capita per annum at 1080 pay points per million people in India exist. Singapore, in comparison had 728 such transactions with over 31,000 pay points.
Singh said, "Post demonetisation, the adoption and accessibility of digital payments has grown many fold and such steps shall ensure that our dependency on cash reduces even further and we move swiftly towards a more transparent and prosperous economy."