Naidu panel for Rs 1,000 subsidy on smartphones, taxing withdrawals above Rs 50,000

New Delhi - The government must tax cash transactions above Rs 50,000, abolish banks’ interest on credit card transactions, give tax refund to consumers on digital payments and extend Rs 1,000 subsidy on smart phones to promote a less-cash, digital economy, a panel of Chief Ministers has said in a report. The Chief Ministers’ Panel report, which was submitted to Prime Minister Narendra Modi by committee representative Chief Minister of Andhra Pradesh N Chandrababu Naidu, has also made a case of lower/zero merchant discount rate (MDR) for all digital payments to government entities and cap on cash in all type of big ticket transactions. The ‘Merchant Discount Rate’ is charged to a merchant by a bank for providing debit and credit card services. The committee comprising Maharashtra Chief Minister Devendra Fadnavis and Madhya Pradesh Chief Minister Shivraj Singh Chouhan has also asked the Centre to promote Aadhaar Enabled Payment System (AEPS) by incentivising and not charging MDR. [caption id=“attachment_2321426” align=“alignleft” width=“380”]  Digital India[/caption] The other recommendations include tax incentives for micro ATMs, biometric sensors etc. and tax refund for consumers using digital payment up to a certain proportion of annual income. When asked how sure he was about incorporation of these recommendations in the forthcoming  budget on February 1, Naidu said, “I am very confident about that.” Explaining about advantage of digital payments, he said that there are lots of cost of handling physical currency because of its printing, movement and security while there is no such cost for digital currency. Naidu also elaborated that with the increase of volume of digital transitions, the cost will reduce and there is huge opportunity in India because non-cash payment transitions by non-banks per capita per annum is 11 in the country as compared to 26 in China, 728 in Singapore, 355 in the UK, 142 in Brazil, 70 in South Africa and 32 in Mexico. Similarly, the report highlights that the number of (cashless) pay points per million people are 1,080 in India as against 31,096 in Singapore, 30,078 in the UK, 25,241 in Brazil, 7,267 in South Africa, 7,189 in Mexico and 16,602 in China. The panel made a case for relief in prospective taxes for encouraging merchants to accept digital payments and no retrospective taxation to Merchants doing digital transactions. It also suggested that for Aadhaar Pay, Biometric (FP & Iris) sensors should be provided at 50 per cent subsidy to all merchant points. The panel said in its interim report that all payment banks and banking correspondents should be made interoperable through AEPS and also provide infrastructure for 1,54,000 post offices by way of interoperable Aadhaar enabled Micro-ATMs. Naidu also suggested insurance for all digital transactions to safeguard the interest of people going cashless. The Chief Ministers’ panel has also pitched for creating fund from savings generated through cash-less transactions for incentivising acquiring bank acceptance infrastructurcreation in semi-urban and rural areas. It said the contactless payments should be promoted for travelling in buses and suburban trains in metro cities and UPI App should contain a common interoperable UPI QR Code besides banks to encourage the common QR Code at merchant location. It also said the rural and urban cooperative banks should be onboarded to digital transactions mode immediately. Explaining about the constraints being faced by the government to encourage digital transactions, the panel said there is a need to bring about attitudinal change among people to encourage them to go for cashless transitions through training. The panel has also drawn attention towrads other constraints like lack of hardware with merchants like (digital payment) acceptance infrastructure. It also stressed on the need for improving the Internet connectivity and data infrastructure to boost digital transactions. Naidu also spoke about lack of interoperability of various modes of digital payments and cyber security for the purpose. Besides, Naidu also suggested that there should be a legislation to accommodate digital transactions. The panel has also asked the Centre to device appropriate digital payment mode for high value transactions and also expressed concerns that digital transactions are costlier than cash ones. The panel to suggest measures to enable all sections of the population to migrate to the digital payments was constituted on November 30, 2016. The panel had four meetings and video conferencing. For full coverage of Union Budget 2017 click here .