The finance ministry recently had stated a move that might boost digital payments, businesses with an annual turnover of above Rs. 50 crore shall have to mandatorily offer electronic mode of payments towards their customers from 1st November 2019.
Also, no charges or merchant discount rate (MDR) charge that payment systems as well as banks levy on commercial transactions shall be imposed on either customers or merchants.
Following this announcement, amendment was made in the Income Tax Act as well as in the Payment and Settlement Systems Act 2007. The Finance Minister Nirmala Sitharaman had stated in her Budget speech that these establishments are required to offer low-cost digital payments towards their customers and the Reserve Bank of India as well as the banks is required to absorb the cost of transactions.
The Central Board of Direct Taxes (CBDT) stated in a circular that cost-free digital payments would come into effect from 1st November 2019.
The Central Board of Direct Taxes (CBDT) had invited banks and authorized payments system providers in order to send an application, mentioning that they are willing that their payment system could be taken into consideration and might be used for the purpose as the government is planning to recommend certain electronic modes of payment.
Payments by means of digital modes would make transactions for mid- and large-sized businesses more transparent and thus stop tax evasion.
This action might bring down the cost of the digital payment for the consumers, along with service providers. The banks are also invited towards facilitating digital transactions for certain electronic modes of payment.
After the Narendra Modi administered government came to power in the year 2014, digital payments had received extreme importance. The government has massively pushed for digitization. Though, cash transactions still occupies a large portion of digital payments. In order to endorse digitization, the government had launched the Digital India scheme, amongst others.
Conclusion
Thus it could be said that for faster adoption of digital payments, Finance Minister Nirmala Sitharaman in the Union Budget had stated that business establishments who have annual turnover of above Rs 50 crore would have to offer low-cost digital modes payments towards customers and not levy charges or MDR on customers as well as merchants.
Nirmala Sitharaman had also stated in her budget speech that the business establishments with annual turnover of above Rs 50 crore must offer low-cost digital modes of payment towards their consumers and the Reserve Bank of India and banks must absorb the cost of transactions.
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