Digital push: You may soon get 'instant cashback' on your GST e-payments

GST Council meet to focus on MSME issues; it is proposed that consumers get instant cashback up to two percentage points for those paying digitally

The Goods and Services Tax (GST) Council might decide to incentivise small digital payments by allowing ‘instant cashback’. 

Its meeting on Saturday, to be chaired by officiating finance minister Piyush Goyal, will also take up a host of issues raised by micro, small and medium enterprises to revive economic growth. At least 100 proposals have come from across the country.

The ministerial panel to incentivise digital payments, chaired by Bihar’s deputy chief minister, Sushil Modi, will meet on Friday evening to finalise the proposal to come before the Council a day later.

It is proposed that consumers get instant cashback up to two percentage points for those paying digitally. The discount will be limited to Rs 100 a transaction.

The department of information and technology is learnt to have proposed a two-part payment. The first swipe will deduct basic payment and the second will deduct tax, said an official. “Once the tax component is deducted, the consumer will get instant cashback,” the official added.

The offer will be for business-to-consumer (B2C) transactions for goods and services that face a tax rate of three per cent or more. It has been calculated that the proposal will mean a hit of anywhere between Rs 80 billion and Rs 140 billion annually or Rs 10-15 billion a month.

Interestingly, in an earlier report, the same committee had recommended deferring of digital incentives on GST by a year. Last month, Sushil Modi had told Business Standard, "We want to wait till GST revenues are stabilised. So, digital payment incentives should be considered (only) in 2019-20.”

In its earlier meeting, the Council had reduced GST rates on a little over 100 items.

Most prominently on consumer durable items such as refrigerators, small screen TVs and washing machines from the highest slab to 18 per cent. That is expected to cost the exchequer around Rs 100 billion annually. The government collected Rs 964 billion in GST during July.

Apart from Modi, the panel comprises West Bengal finance minister Amit Mitra, Gujarat deputy chief minister Nitinbhai Patel, Haryana excise and taxation minister Abhimanyu and Punjab finance minister Manpreet Singh Badal. In 2016-17, the number of digital transactions was 10,760 million, with the average value of a transaction (debit and credit card) was Rs 1,833.

Transactions below Rs 1,000 accounted for 16 per cent of all digital transactions; those between Rs 1,000 and Rs 2,000 were 14 per cent and above Rs 2,000 the remaining 70 per cent. In 2017-18, the number of digital transactions were around 18 billion.

MSMEs’ wish list

The Council has received a little over 100 proposals from micro, small and medium enterprises (MSMEs) and their associations. Around 200 recommendations have been compiled for the Council to consider. The suggestions include halving of fees for filing appeals, waiving the late fee penalty for MSMEs and appointment of officers to help GST payers file returns. The Federation of Indian MSMEs wants the doing away of GST on advance payments. 

“In a dynamic environment, delivery dates are changed and advances refunded. The GST Rules make it extremely difficult to deal with such situations,” goes the recommendation.   It has also suggested that modification of returns be allowed till a return is not submitted. This is being allowed now for only GSTR-3B, the summarised return.

The sector has also sought to bring services under the composition scheme. Currently, only restaurants are included. The scheme allows a flat tax rate and simplified return filing. Andhra Pradesh’s finance minister has sought a reduction in tax rates on biscuits, rice bran, utensils, fried gram, dried tamarind, breakfast cereals and instant food, among others.