India’s Government To Spur eCommerce With Tax Breaks, Other Incentives

India is likely to adopt several incentives to spur increased adoption of electronic payments, according to draft proposals released by the government on June 22.

Livemint reported Monday that incentives range from a charge on high value cash transactions to lower transaction fees for electronic payments in tandem with tax benefits. The proposals, though in early stages, represent attempts to curb the impact (and availability) of black-market money. The government wants to encourage more use of debit cards, credit cards and mobile payments, reported Livemint.

Finance minister Arun Jaitley had said in the 2015–16 budget that the administration will seek to stimulate and, in some cases, incentivize electronic transactions.

Tax breaks for both consumers and merchants boosting their frequency of electronic transactions and a waiver of charges and convenience fees for using cards to pay at the pump or for utilities should help speed cashless adoption.

The draft language also suggests that banks could station POS terminals in proportion to card issuance. And, referencing charges levied by telecom payments on payments made electronically, the government would look to “rationalize” those charges, which currently stand at ₹1.50 per transaction for such payments.

One area that could possibly be of contention: Livemint reports that the draft suggests that “tax benefits could be provided to merchants for accepting electronic payments, e.g. an appropriate tax rebate can be extended to a merchant if at least, say, 50 percent value of the transactions is through electronic means. Alternatively, 1–2 percent reduction in value-added tax could be considered on all electronic transactions by the merchants.” Yet, notes the site, state governments may not unanimously accept that proposal.

There are signs that the eCommerce market is expanding by leaps and bounds in India. One key area for growth: B2B, where a recent Walmart report noted that that subset of electronic payments could be worth as much as $700 billion by 2020.

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