NEW DELHI: Taking a major step towards transforming into a cashless economy, the Indian government has on Thursday decided to waive service tax on card transactions of up to Rs 2000. An official notification to this effect is expected to be released in a week after notifying in the ongoing parliamentary session.
Post the demonetization of Rs 500 and Rs 1000 currency notes, the cash crunch seems to have created an opportunity to the government to drive India towards a cashless economy. As of now, Indians are still facing cash crunch with the government’s restrictions on cash withdrawals in place. However, the situation has created an opportunity for the BJP-led Central government to make people use digital payments in order to overcome the cash crunch.
Accordingly, the government has decided to waive off service tax on all transactions below Rs 2000. The exemption will be applicable only on transactions made through debit and credit cards. Sources said that the government will soon release an official notification to this effect.
Finance Minister Arun Jaitley is expected to table a notification regarding the amendment in the parliament. The government needs to amend the service tax notification of 2012 to apply exemption for debit and credit cards.
Prior to this, the government has asked various banks to install another 10 lakh PoS terminals across the country to boost cashless digital transactions.
Though the waiver of service tax encourages common public to make cashless transactions, in the longer run it is evident that the government will have to miss a significant amount of tax revenue.