A Group of States Finance Ministers on GST discount for digital payment is set to consider cash-back mechanism for incentivising digital payment. The proposal will be taken up for final decision at the meeting of the GST Council scheduled on August 4.
“The idea is to give an incentive at the rate of 20 per cent of total sales value or ₹100, which ever is less, for transactions done through RuPay card and UPI,” a senior government official told BusinessLine . He said it will be a kind of cash back system where the required amount will be reversed in the bank accounts. He estimated that total annual outgo could be ₹900-1,000 crore. Although, no date has been fixed for the meeting of the States’ Finance Ministers panel which is headed by the Deputy Chief Minister and Finance Minister of Bihar Sushil Kumar Modi, it could take place any day before August 4.
Rupay card
RuPay is card payment scheme launched by the National Payments Corporation of India (NPCI). It is like the Master or Visa credit and debit card. The card got a boost when the Government decided to provide the samefor Pradhan Mantri Jan Dhan Yojana (PMJDY) account-holders.
According to Parliamentary questions, a total of 46.37 Rupay cards were issued till February. This has a major share of PMJDY account-holders. For example, as on July 4, about 24.06 crore RuPay debit cards have been issued under PMJDY.
Similarly, UPI or Unified Payment Interface is another means of digital payment that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. According to NPCI data for the month of June, total of 110 banks were providing UPI system where 246.37 million transactions, involving an amount of ₹40,834 crore, took place during the month.
More benefit
The official quoted above said that the new proposal for digital payment will not be available for all credit or debit card holders except those having RuPay. “Since most of the RuPay card transaction is small, expenses will be much lesser than earlier thought of GST discount for digital payment proposal. Similarly, there will be no need for maintaining two sets of GST rates,” he said.
The new proposal is worked out after the GST Council, in its meeting on July 21, accepted the States’ FMs panel’s recommendation to defer the proposal of GST discount on digital payment. However, it asked the panel to work on a new mechanism, especially for Rupay and UPI, as it thought that the two digital payment methods would benefit more and more people.
Earlier, the proposal was about providing “a concession of 2 per cent in GST rate on B2C (Business to Consumer) supplies, for which payment is made through digital mode [1 per cent each from applicable CGST and SGST rates, if the applicable GST rate is 3 per cent or more] subject to a ceiling of ₹100 per transaction.” It was estimated that total revenue implication, under this proposal, for the Government would be around ₹15,000 crore.