Give Rs. 1,000 subsidy to buy smartphones: CM’s panel

A Rs 1,000 subsidy for purchase of smartphones by non-tax assesses and small merchants and a cash transaction tax on withdrawals of Rs 50,000 and above in banks have been recommended by a Chief Ministers’ panel on Tuesday to encourage digital payments.

The Committee of Chief Ministers (CMs), formed to prepare the road map for rapid adoption of digital payment methods, on Tuesday, recommended levying a handling charge for cash payments above ₹50,000, while pitching for tax breaks to consumers and merchants using digital modes of payments.

In its interim report submitted to Prime Minister Narendra Modi on Tuesday, the panel convened by Andhra Pradesh CM Chandrababu Naidu, also recommended abolition of the merchant discount rate (MDR) to make digital payments cheaper than cash.

“Bringing down cost of digital transactions is key to success of digital payments. We have recommended levy of banking cash transaction Tax (BCTT) on transactions of ₹50,000 and above to curb use of cash for large transactions,” Mr. Naidu said after submitting the report to the PM.

The committee also recommended relief in prospective taxes for encouraging merchants to accept digital payments and no retrospective taxation to merchants doing digital transactions.

“Consider cap on maximum allowable limit of cash in all types of large ticket size transactions… All government sections like insurance, educational institutes, fertilisers, PDS, Petroleum etc., to switch to digital payments…Lower or Zero MDR for all digital payments to Government entities,” the report said.

Other suggestions to incentivise digital payment included extending tax incentives to micro ATMs, biometric sensors, etc., promoting Aadhaar-Enabled Payment System (AEPS) and not charging MDR.

“For Aadhaar Pay, Biometric (fingerprint and Iris) sensors to be provided at 50% subsidy to all merchant points… Tax refund for consumers using digital payment up to a certain proportion of annual income,” the report stated.

Further, a subsidy of up to ₹1,000 has been proposed on smartphones for non-income tax assesses or small merchants. The committee, which comprises 13 CMs, has proposed that all payment banks and business correspondents be made inter-operable with the use of AEPS.

It also recommends that Aadhaar be made primary ID for KYC. “Section 57 of Aadhaar Act can be applied. Amendment to PMLA Rules required,” the report said.