TN, Assam, Haryana likely to roll out pilot for incentive on GST payment by digital means

Tamil Nadu, Assam and Haryana are likely to roll out on pilot basis cash back incentive for digital payment through RuPay card and BHIM app.

The GST Council, in its meeting on Saturday, decided to implement new incentive mechanism for digital first on pilot basis. “States will volunteer for pilot project,” Interim Finance Minister Piyush Goyal told here on Saturday after chairing the 29th meeting of the GST Council. Later a senior Government official said that three states, Tamil Nadu, Assam and Haryana agreed for the pilot roll out in the meeting. Based on the result of the pilot, the GST Council will take final call on rolling this out nationwide.

The proposal talks about incentivising digital payments through Rupay card and BHIM app by way of a cash back. Once implemented, customers making payments using Rupay card and BHIM UPI, would get a cashback of 20 per cent of the total GST amount, subject to a maximum limit of Rs 100. It is expected that such a mechanism will not just encourage digital payment in semi urban and rural area but also help in boosting GST compliance as entire transaction will be recorded. Revenue forgone is expected to be Rs 1000 crore which will be shared equally between Centre and States.

Meanwhile, West Bengal has opposed the idea of such incentive. “It is against the basic principle. Once you incentivise one thing, then there will be demand for more issues to be covered,” Amit Mitra, Finance Minister of West Bengal said. He also mentioned that cost of this incentive will be recovered from GST collection which is already seeing shortfall.

Commenting on the new development, MS Mani, Partner at Deloitte India said, “The concept of incentivising digital payments has been in the works for quite some time and it is expected that the same will be extended to all payment intermediaries after the pilot project is concluded,” Echoing the same sentiment, Abhishek A Rastogi, Partner, at Khaitan & Co. said that a cashback of 20 per cent on the GST amount payable on digital transactions done through Rupay debit cards and BHIM UPI transactions is very innovative move to transform into a cashless economy.

However, the modalities on implementation have been left to the discretion of States. “It remains to be seen how many States are interested in implementing the Scheme and what is the monetary limit fixed on the benefit. Besides, the Banks and the Government will be required to put in place appropriate software and infrastructure support to facilitate the cash back scheme,” he said.

GoM for MSME

Meanwhile, the Council decided to constitute a Group of Ministers under the chairmanship of Minister of State in the Finance Ministry Shiv Pratap Shukla to suggest measures for Micro, Small and Medium Enterprises (MSME). In fact, the council discussed various suggestions to ease the compliance of GST for MSMEs. It also recorded all the measures taken during last 13 months under the new indirect tax regime.

Later, Goyal said that matter related to law, rules and regulations will go to the Law Committee of the GST Council while matter related with rates to be considered by Fitment Committees. “Recommendations from both committees and various other proposals to be taken up by GoM first and then by GST Council,” Goyal said.

GST Council will have its next meeting on September 28-29 in Goa.