INCENTIVISING E-TRANSACTIONS - BABY STEP IN RIGHT DIRECTION

By Ruma Dubey

The next time you swipe your debit/credit card at the petrol pump or while booking your railway ticket; be assured, you might be eligible to get a tax rebate.

The move, obviously a baby step towards encouraging digitization and cutting down on black money, is a good one. The Govt has put in a proposal wherein, if any method of online method is used to make payments, you could be immediately eligible for an Income Tax benefit. These, termed as e-transactions will include payments made through debit/credit cards, mobile wallets, mobile apps, net banking, NEFT, ECS and other online modes.

Putting this draft out into the public domain for suggestions, feedbacks and brickbats, the goal of the proposed policy is to provide the necessary incentives to use E-transactions to replace the use of cash - either in government transactions, or in regular commerce over a period of time through policy intervention.

Let’s take a quick look at the highlights:

• Currently, Govt departments/ Central PSUs levy convenience fee/service charge/surcharge for making e-transactions (card payments) to essential commodities,utility service providers, petrol pumps, gas agencies, railway ticket counter/IRCTC etc. The Govt is looking at the option of removing these charges.
• Utility service providers could be advised to give a discount to users for small ticket payments through e-payments – something like what BSNL does right now, provides an incentive of 1%  of the billed amount if the payment is done through electronic mode.
• Government departments to adopt national E-payment gateway ‘PayGov India’ for collection of revenue, fee, penalties etc.
• Plans to reduce the Merchant discount rate (MDR) – it is currently at 0.75% on Debit Card transactions upto Rs.2000 and 1% on all transactions above Rs.2000.
• Tax benefits to merchants accepting debit/credit card payment – plan to provide tax rebate on 50% value of the transactions through electronic means. Or else 1-2% reduction in value added tax could be considered on all electronic transactions by the merchants.
• Tax benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means.
• Mandating settling of high value transactions of, more than Rs.1 lakh, only by electronic means.
• At present, banks have to report the aggregate of all the payments made by a credit cardholder as one transaction, if such an amount is Rs.2 lakhs in a year. To facilitate high value transactions, the ceiling of Rs.2 lakhs could be increased to Rs. 5 lakhs or more.
• Improve broad band connectivity to enable mobile based payments on a wider scale.
• The last date to file in your comments or feedback with the Ministry of Finance on the same is 29th June, before 5 pm.

In terms of global ranking, India has a long, long, very long way to go. Denmark currently ranks number one in terms of digitization with 97% of all transactions digitized. This index is calculated taking into consideration five categories - (1) Connectivity, (2) Human Capital, (3) Use of Internet, (4) Integration of Digital Technology and (5) Digital Public Services. And as per the The Global Information Technology Report 2014, prepared by the World Economic Forum and INSEAD, Finland tops the rankings, followed by Singapore in 2nd place, Sweden at 3^rd. India ranks at a dismal 83, much below countries like Azerbaijan, Uruguay, Trinidad and Tobago, Montenegro, Sri Lanka, Serbia, Mexico, Eucador, Philippines.

Thus in this context, this is indeed a small baby step in the right direction towards digitization but clearly we have a long way to go. Assuming that these suggestions will help curb black money is a joke. Seriously, all the major big, black money is routed into real estate and jewellery. So unless these realty and gold transactions do not get completely digitized, it would be foolish to think that such small moves will help curb black money, But yes, these small baby steps will ensure India does get geared for more digitization as we grow and maybe over the next few years, we can actually see realty going completely transparent. Now that is a pipe dream, given the strong nexus between builders and politicians – that will never happen as there is really no political will to make all realty transactions into e-transactions.