GST cash backs on digital payments

States have to pass GST cash backs on digital payments

The next meeting of the GST Council will be held on Sept 28-29 in Goa.

NEW DELHI: The GST Council on Saturday cleared a proposal to offer GST cash backs on digital payments on trial basis to promote digital payments through BHIM app, Rupay cards and UPI system to promote cashless transactions in rural and semi-urban areas.

Initially some states would roll out GST cash backs on digital payments to promote, and the GSTN, the IT backbone of the GSTN, and the NPC (National Payments Corporation) of India will develop a online system soon for the same, finance minister Piyush Goyal told reporters after the GST Council meeting here.

In this system taxpayer will get GST cash backs on digital payments through Rupay card and BHIM UPI, total cash back of 20 per cent of the total GST amount, subject to a maximum limit Rs 100/-, Goyal said, while terming the move as a step towards formalisation of the economy.

“We have decided to undertake a pilot project. A broad framework has been worked out so that users of Rupay debit card, BHIM, Aadhaar, UPI, USSD transactions can be given the incentives because these are mostly used by poor people,” Goyal said.

A GOM under Bihar deputy chief minister Sushil Modi, had yesterday worked out the cashback mechanism and had assessed that the revenue loss on account of it would be Rs 1,000 crore annually.

“The Council has decided to prepare the software and backend for this (cash back incentive) and whichever state volunteers for it, the pilot can be run in that state itself and impact on revenue can be assessed,” Goyal said.

The GST Council also set up a six-members panel of ministers under minister of state for finance Shiv Pratap Shukla to look into the issues of the MSME sector.

Other ministers of panel are Delhi deputy chief minister  Assam finance minister Himanta Biswa Sarma,Manish Sisodia, Bihar deputy chief minister Sushil Modi, Kerala finance minister Thomas Isaac and Punjab finance minister Manpreet Singh Badal.

Paralelly, the law and procedure as well as rates related issues for the MSME sector would be considered in detail by the law committee and the Fitment Committee comprising central and state tax officers. They will give their recommendations to the Group of Ministers, Goyal said.

On the issues faced by MSMEs, Sisodia said ever since the GST has been rolled out, there were concerns of the sector.

In the older system, small businesses with turnover of up to Rs 1.5 crore were fully exempt from excise duty.

“While on one side there are big businesses who give more taxes, but then on the other side there are small businesses who are large in number, who gives employment. Both have to be given importance.

“Rule should not be such that we brainstorm for those who give more tax to government, and small business just continue to pay taxes,” Sisodia said, adding the GST Council will work out a framework to support MSMEs.

Punjab finance minister Manpreet Singh Badal said small and medium enterprises provide 70 to 80 per cent employment in the country, but they were suffering huge losses.

“What has been decided is that GoM within next six weeks will give a report on how do we enable industries to compete and what are the processes which are destabilising the smaller players,” Badal said

Meanwhile, tax experts welcomed the council’s decision to offer GST cash backs on pilot basis.

“It is good that the government is planning to do a pilot for only limited number of users and not for all digital payments, which was initially contemplated. It will also mean that revenue impact of this decision would not be very significant,” PWC partner and indirect tax leader Pratik Jain said.

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