Exactly one month after Prime Minister Narendra Modi banned 500 and 1000 rupee notes, the government has now moved to encourage cashless transactions. The centre has decided to forego service tax on debit and credit cared payments up to Rs 2,000, reports PTI.
Currently, 15% service tax is added and foregoing this is likely to encourage more people to transact via plastic money.
This move is also likely to push more small scale establishments like restaurants to install point of sale terminals (POS). The goverment had recently asked banks to install additional 10 lakh PoS terminals by March 31, 2017 across the country.
A notification amending the service tax rules to provide this exemption is likely to be moved shortly.
The decision to demonetise 500 and 1000 rupee notes and the resultant crisis for cash has forced the government to think of radical ways to incentivise cashless transactions.
Recently, RBI relaxed norms for 2-factor authentication for payments up to Rs. 2,000. This means that banks will have to give customers the option to bypass OTP for online transactions for transactions up to Rs 2,000.
On Wednesday, RBI said that nearly Rs 12 lakh cr has come back into the banking system since November 10 when exchange of old notes and deposits were allowed. The government and central bank has also appealed to the public not to hoard lower denomination notes and move to digital mode in order to avoid queues at banks and ATMs.
Speaking to reporters, RBI Governor Urjit Patel said that "Demonetisation will give thrust to digitisation. We are working very closely with banks to catalyse and improve on all host of factors to push the digital economy."