Government Mulls Over Incentives to Boost Digital Transactions
The government of India is more than serious about encouraging digital transactions in the country. In a move aimed at discouraging cash transactions, the finance ministry, led by Arun Jaitley, is mulling over giving a 2% incentive over the applicable GST in case of digital payments, where the bill is up to Rs. 2,000.
The proposal, which may extend the benefit in the form of a discount or a cashback, is being discussed among the key members of the finance ministry, RBI, cabinet secretariat and ministry of electronics and IT.
The IT ministry meanwhile, has been tasked with the responsibility of helping build a robust infrastructure that could enable seamless digital transactions across the country.
A source told a leading newspaper that “the idea was to incentivise all kinds of digital payments, especially smaller transactions, in line with the government’s plan of making India a less-cash economy”.
The source said that relief was being mooted for “smaller transactions” as those are huge in number and are mostly preferred through the cash mode. “Transactions of up to Rs. 2000 are very high in volumes and if an incentive can be given here, it will provide an impetus to digital payments while facilitating the entry of more people within the formal economy. This will help plug leakages while playing a credible part in countering the development of black money”, the source added.
However, it is not yet clear as to how the government plans to route the incentive.
Prime Minister Narendra Modi himself has been actively pushing his “Digital India” agenda and has been demanding that all his ministries and government departments help facilitate cashless transactions. During his Independence Day speech this year, the Prime Minister had also urged people to use less cash.
At an event to inaugurate 100 branches, 100 ATMs and 100 digital villages of Vijaya Bank, finance minister Arun Jaitley had also reiterated that the government was planning to extend a lot of incentives for people to shift to digital mode of payments instead of cash.
Jaitley was of the view that digitisation should percolate to the lowest levels of the society including villages, as cash transactions are usually insecure.
“One of the great challenges before us is to further popularise cashless tools because cash is always insecure. In the long run it neither helps the society nor the individuals. Therefore, for greater digitisation, you need more touch points, more ATMs and more banks. And certainly, the penetration has to go down to villages”, Jaitley said.
The finance minister added that when cash operates in an informal system, its ownership is not easily identified, which aids the cover-up, resulting in states suffering in terms of tax non-compliance.
“It also affects the state’s spendings on national security and poverty alleviation schemes and hence this system cannot go on indefinitely. Therefore, if you see the trend in most developed countries, they bade goodbye to cash”, he added.
This article was originally published in The Economic Times.