New Delhi, May 9: The government has estimated that the Centre and the states may have to forgo up to Rs 15,000 crore in offering discounts of up to Rs 100 on GST for every digital transaction, including those done using credit or debit cards or mobile wallets and mobile and net banking.
Sources said the estimate is based on the average ticket size of the transaction being Rs 1,400 and a 2% relief being proposed on it. In case of transaction size of Rs 900 and assuming that 40% of the estimated 1,329 crore transactions were using digital payment tools, the revenue foregone would be of the order of Rs 9,500 crore a year.
The plan is limited to business to consumer (B2C) transactions for goods and services that attract 3% or more levy.
The issue was discussed at last week’s GST Council meeting but a decision was deferred as a couple of states, including West Bengal, opposed the plan and in the absence of a consensus a group of state finance ministers headed by Bihar deputy CM Sushil Modi was constituted. The panel will submit its report in a fortnight.
Bengal finance minister Amit Mitra was of the view that the move is against the interests of consumers in rural areas, who may not have access to digital transaction tools. The Centre and most other states are in favour of the plan as it is seen as a tool that will encourage use of non-cash modes — at least for smaller transactions — and to that extent resulting in more transactions being reported (lesser evasion) and the government realising more revenue. This, officials said, will help the government more than make up for the revenue foregone.
It is quite common across the country for retailers to demand cash payments, citing higher transaction costs for card payments, although reality is they under-report sales and pay lower taxes. The government has come up with a discount on GST as a solution to counter this widespread evasion. Sources said the government is upbeat on the model practised in Brazil, where consumers are given credits even for purchase of a pack of cigarettes using credit cards or other digital means.
The credits are linked to consumers’ social security numbers, which can be used to speed up passport, driving licence issuance or other facilities. While officials reckon that this will be easier to implement in India, given the widespread issuance of Aadhaar, there is no move to have a similar policy in place, at least for now.