Aiming to boost digital payments, the government on Monday proposed tax benefits to merchants for accepting electronic payments and income tax rebates to consumers for paying a certain proportion of their expenditure through electronic means.
“An appropriate tax rebate can be extended to a merchant if at least say 50 per cent value of the transactions is through electronic means. Alternatively, 1-2 per cent reduction in value added tax could be considered on all electronic transactions by the merchants,” the finance ministry said in the ‘Draft Proposals For Facilitating Electronic Transactions’.
The ministry also proposed mandating settling of high value transactions of more than Rs 1 lakh, only by electronic means.
In other measures to promote wider adoption of e-transactions, the ministry proposed reduction in the Merchant Discount Rate (MDR) and the rationalisation of the distribution of the MDR across different stakeholders. At present, there is an MDR of 0.75 per cent on debit card transactions up to Rs 2,000 and 1 per cent on all transactions above Rs 2,000.
To enable policy for e-transactions in government collections, the draft proposals said the feasibility of removing the prevailing convenience fee/service charge/surcharge levied by government departments and PSUs for making e-transactions to essential commodities, utility services, petrol pumps and railway ticket counter/IRCTC.