Cash transactions above Rs 50,000 should be taxed: CMs tell PM Modi
25 January 2017,
PM Modi, Narendra Modi, Digital Transactions, Cashless Economy, N. Chandrababu Naidu, Demonetisation, Aadhaar card, Shivraj Singh Chauhan, Devendra Fadnavis
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.
“To curb use of cash for large transactions consider a levy of banking cash transaction tax on transactions of Rs 50,000 and above. Consider a cap on maximum allowable limit of cash in all types of large size transactions”, said the panel led by Andhra Pradesh Chief Minister N. Chandrababu Naidu.
The interim report on promoting “Digital Payments” was submitted to Prime Minister Narendra Modi on Wednesday by Naidu and Chief Ministers of Madhya Pradesh Shivraj Singh Chauhan, Maharashtra Devendra Fadnavis and Sikkim Pawan Kumar Chamling.
Naidu later held a press conference to highlight the main points.
The report laid emphasis on the use of Aadhaar and said this unique identity number must be made the primary identity point for the “know your customer” (KYC) norms. It said the existing Aadhaar law can be applied towards this.
The report sought to point out how low in rankings India stood in terms of pay points for digital transactions (like swipe machines with merchants) – it is 1,080 per million people in India, 16,602 in China, 7,189 in Mexico, 25,241 in Brazil and 31,096 in Singapore.
Among its various recommendations, the panel said infrastructure must be provided for the 1,54,000 post offices by way of interoperable Aadhaar enabled micro-ATMs and subsidy of up to Rs 1,000 be extended on smart phones for non-income tax assesses or small merchants.
“All government sections like insurance, educational institutes, fertilisers, public distribution system and petroleum must switch to digital payments”, it said. “Rural and urban cooperative banks should be on-boarded to digital transactions mode immediately”.
In terms of Unique Identity Number, the panel said all payment banks and correspondents, besides post offices, must be interlinked to the Aadhaar-enabled payments system.
The panel said for the success of a digital economy, all stakeholders must be on board – large financial institutions and telecom entities including regulators, with awareness creation entrusted with microfinance institutions, NGOs, cooperatives, state-run units and panchayati raj bodies.
As per the report, some of the constraints listed by the panel in the adoption of a digital economy includes attitudinal issues, hardware including payments acceptance infrastructure, data connectivity and cyber security. It said cash transactions were also cheaper than digital ones.
The high-powered panel was asked to suggest measures to enable all sections of the population to migrate to digital payments, and recommend measures to leapfrog to the advanced digital payment systems of global standards.
It was constituted on November 30, last year after the government demonetised Rs 500 and Rs 1,000 notes.