Cashback to biz, price benefit to consumers for digital transactions on anvil

The government is working on a proposal to incentivise digital transactions by providing cashbacks to businesses and price benefits to consumers, a source said.

As per the proposal being worked out by the Revenue Department, consumers paying through the digital mode would be offered a discount over the maximum retail price (MRP). The discount would be capped at Rs 100.

Businesses, on the other hand, could get a cashback based on the quantum of turnover through the digital mode.

The proposals to encourage digital transactions are likely to be placed before the GST Council, chaired by Finance Minister Arun Jaitley and comprising state ministers, on May 4.

According to the source, the issue of providing incentive for digital transaction was discussed at a meeting held in the Prime Minister's Office.

During the meeting, three possible modes of incentivising businesses to go in for digital transactions were discussed. Apart from cashbacks, a proposal to allow businesses to obtain tax credit on the basis of turnover obtained through digital mode was also discussed.

This would have worked like the input tax credit mechanism wherein businesses can credit for taxes paid on raw materials.

Besides, the option of allowing businesses to offset their GST liability up to a threshold for using digital transaction was also deliberated.

The source said the Revenue Department has zeroed in on the option of cashback to businesses based on a threshold of digital transaction. This would be easier to implement and cannot be misused by unscrupulous elements.

As a matter of precaution, the department will ascertain the veracity of the digital transactions reported by the businesses and then credit the cashback to their bank account.

During the PMO meeting, it was also discussed if any incentives could be given for digital transaction from the direct taxes side.

The direct tax department, the source said, has outlined the steps it had taken to discourage cash dealings. Besides, for small businesses opting for presumptive taxation scheme, it had reduced the rate for calculation of deemed profit from 8 per cent to 6 per cent in respect of the amount of total turnover or gross receipts received through banking channel/digital means.

he source said since the incentives would have been on the basis of the turnover of the businesses, it was felt that the indirect tax department would be better placed to incentivise the businesses and hence the GST Council would have to give a final go ahead.