Government and the RBI are working hard to promote cashless transactions in the economy. Several incentives are declared to maximize the cash constraint situation to promote cashless transactions. Despite some difficulties like lack of digital and tech knowledge among bulk of the people, inadequate digital payment infrastructure and prevailing bias towards cash oriented transactions, these measures may bring up the volume of cashless transactions. The support measures launched by the government covers incentives in the form of tax (service tax) concessions, bonus (petrol, railways, insurance), promotion of digital infrastructure (PoS machines, cards etc.) and reduction of charges (MDR) for the digital payment segment.
Following are the main steps announced by the FM recently:
Service tax exemption on card based payments upt to Rs 2000
Service tax exempted for all card based payments upto Rs 2000. Currently, you pay 15% as the tax on these transactions.
Railways: discount and free accident insurance.
Insurance: All Online booking of railway tickets will get Rs 10 lakh accident insurance.
Discounts on digital payments
a) Accommodation and food: Digital payment for railway catering, accommodation, retiring room will be entitled to a discount of 5 per cent.
b) Discount on digital payment for travelling: Monthly and seasonal suburban railway tickets purchased through digital mode will get 0.5 per cent discount.
Insurance: 10 per cent and 8 per cent discount will be offered in case of general and life insurance for buying new policy or paying premium online via PSUs websites.
A discount of 0.75% for customers who pay for fuel at pumps through digital means.
Villages: digital payment promotion
Point of Sale Machines in villages: Two point of sale machines will be provided to each village with a population of up to 10,000. The support fund will be provided from the financial inclusion fund. In the aftermath of the demonetization decision, the government asked banks to install additional 10 lakh PoS terminals by March 31 across the country.
Rupay Kisan Cards to Rural Cooperatives: Rupay Kisan Cards will be given to rural and cooperative banks. Nearly 4.32 lakh farmers can use these cards at point of sale terminals, ATMs and micro ATMs.
Payment for PoS and Micro ATMs restricted to Rs 100 for merchants: Public sector banks will ensure that merchants do not have to pay more than Rs 100 per month for PoS terminals, micro ATMs and mobile PoS. Merchant Discount Rate (MDR): there will be no transaction fees or MDR for transactions with central government, or companies owned by it.
For payment of toll at toll plazas on national highways using RFID card/Fast Tags, a discount of 10 percent will be available to users.
Bulk of these measures are announced by the Finance Minister and the cost of providing these incentives will be borne by respective bodies.