A few days ahead of the budget, a panel of chief ministers has recommended a ban on cash transactions beyond a threshold, and a tax on payments beyond Rs 50,000, seeking to discourage the use of physical currency while suggesting a host of incentives for payments by cards and other digital means.
The committee of chief ministers led by Andhra Pradesh Chief Minister N Chandrababu Naidu, submitted an interim report to Prime Minister Narendra Modi, suggesting a host of tools, including a subsidy of up to Rs 1,000 for smart phones bought by those who do not pay income tax, and small merchants in addition to lowering or doing away with the merchant discount rate or, the fee paid on card and online transactions.
Naidu said he was "very confident" that some of the recommendations would be incorporated in the Budget which will be presented on February 1. While the proposal to levy a cash transaction tax has found support, a section within the government does not favour it, believing that incentives will yield better results. Some of the proposals related to disincentivising cash may find transaction as the Supreme Court-appointed special investigation team too had suggested a cap on cash transactions as well as limit on how much an entity could hold in physical form. The committee said there was a need to strengthen security, expand infrastructure and increase awareness for greater adoption of digital payments. It also proposed tax sops for domestic of micro ATMs and biometric sensors, along with a subsidy of 50 per cent to merchant points using Aadhaar Pay, which will use fingerprint or iris scan.
Naidu said that there was a huge opportunity in India to promote digital transactions because non-cash payments by non-banks per capita per annum is 11 in the country, compared with 26 in China, 728 in Singapore, 355 in the UK, 142 in Brazil, 70 in South Africa and 32 in Mexico. The report also highlights that the number of non-cash pay points per million people are 1,080 in India, against 31,096 in Singapore, 30,078 in the UK, 25,241 in Brazil, 7,267 in South Africa, 7,189 in Mexico and 16,602 in China.
Apart from the CMs, the panel also includes special invitees such as Niti Aayog CEO Amitabh Kant, former chairman of the Unique Identification Authority of India Nandan Nilekani, Boston Consulting Group chairman Janmejaya Sinha, netCORE managing director Rajesh Jain, iSPIRIT co-founder Sharad Sharma and, IIM (Ahmedabad) Professor (Finance) Jayant Varma.
