Ministers’ panel approves GST discounts for digital payments

A Group of State Finance Ministers on GST discount, headed by Bihar Deputy Chief Minister Sushil Modi, on Friday gave its nod for incentivising digital payments through a cash back mechanism.

As much as 20 per cent of total GST paid up to ₹100 per transaction would be provided as cash back on digital payments made through RuPay cards, BHIM App and UPI.

This move will benefit RuPay card holders as well as BHIM App users, especially those in semi-urban and rural areas, Modi told reporters here after the meeting.

Even if 20 per cent of total RuPay card and Bhim App users avail this benefit, the total revenue outgo in a year for the exchequer will not be more than ₹1,000 crore, Modi added. He also said that Centre and States would equally share the spend on this front.

Modi said the proposal will now be taken up by the GST Council, at its meeting on Saturday. Interestingly, the decision will apply only on cards under RuPay platform and the BHIM App.

RuPay scheme

RuPay is card payment scheme launched by the National Payments Corporation of India (NPCI). It is like the Master or Visa credit and debit card. The card got a boost when the Government decided to provide the same for Pradhan Mantri Jan Dhan Yojana (PMJDY) account-holders.

According to Parliamentary questions, a total of 46.37 crore RuPay cards were issued till February. This has a major share of PMJDY account-holders. For example, as on July 4, about 24.06 crore RuPay debit cards have been issued under PMJDY.

Similarly, UPI or Unified Payment Interface is another means of digital payment that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. According to NPCI data for the month of June, total of 110 banks were providing UPI system where 246.37 million transactions, involving an amount of ₹40,834 crore, took place during the month.

The latest proposal has been worked out after the GST Council, in its meeting on July 21, accepted the State Finance Ministers panel’s recommendation to defer the proposal of GST discount on digital payment. However, the GST Council had asked the panel to work on a new mechanism, especially for Rupay and UPI, as it thought that the two digital payment methods would benefit more and more people.

Earlier, the proposal was about providing “a concession of 2 per cent in GST rate on B2C (Business to Consumer) supplies, for which payment is made through digital mode [1 per cent each from applicable CGST and SGST rates, if the applicable GST rate is 3 per cent or more] subject to a ceiling of ₹100 per transaction.”

It was estimated that total revenue implication, under this proposal, for the Government would be around ₹15,000 crore.