Technology companies on Friday welcomed the move to take a 2% tax credit (TDS) cash withdrawal over Rs. Rs 100 million in a year comes from a bank account, while small businesses warn that it will have a negative impact on the economy. Finance Minister Nirmala Sitharaman said in his first budget speech on Friday that the 2% TDS proposal was designed to discourage cash payments from commercial payments.
“This move will hinder spending, which will be a major blow to the economy. The digital payment ecosystem has both advantages and disadvantages. India has not fully utilized this system,” said New Delhi businessman Ajit Khosla. Remittance, travel and remittance services.
“For example, although customer liability is limited in the case of fraudulent electronic transactions, we do not receive a refund immediately. For people with limited funds, this can be a huge problem, especially when a person is forced to pass only Digital payment when doing business,” he said.
Khosla said he is currently being asked to withdraw from the rupee. Rs 200 million per year, using Western Union and MoneyGram and other financial services.
“We get a 0.4% commission from Western Union, but due to this new tax, we will bear huge losses because customers often ask for cash,” Khosla said.
Naresh Kumar, owner of Falcon Cargo Movers in Paharganj, New Delhi, agreed with Khosla.
“We send about 500 packs a day, which costs a lot of cash – shipping, labour and daily expenses. Since we can’t avoid cash payments, the new tax will be a heavy blow,” Kumar said.
However, technology companies believe the move will drive digital payments across the supply chain.
“Encouragingly, the government is continuing its policy of promoting digital payments in India. The cash-strapped TDS exceeds Rs 100 crore per year, which will encourage widespread adoption of digital payments,” said a Paytm spokesperson.
Since Prime Minister Narendra Modi’s launch of the Digital India mission on July 1, 2015, the country’s digital payment business has grown tremendously.
In March 2019, the total number of digital payment transactions reached 33.234 billion rupees, compared with only 7.97% in October 2016.
There are currently several low-cost digital payment methods, such as BHIM UPI, UPI-QR Code, Aadhaar Pay, some debit cards, NEFT, RTGS, etc., which can be used to promote the reduction of the cash economy.
“Under Pradhan Mantri Gramin Digital Saksharta Abhiyan, more than 200 million rural Indians have become a digital culture so far. To bridge the digital divide between urban and rural areas, Bharat-Net is targeting the Internet at every Panchayat local institution in the country. Connected. Accelerated with the assistance of the Universal Service Obligation Fund and public-private partnership arrangements,” Sitharaman said in a Friday speech.
The Minister of Finance also proposed a commercial organization with an annual turnover exceeding Rs. Rs. 5 billion should provide customers with a low-cost digital payment method that does not impose any fees or merchant discount rates (MDRs) on customers and merchants.
Sitharaman said: “RBI and banks will absorb these costs from the savings from dealing with less cash when people turn to these digital payment models.”
She added that the “2007 Income Tax Law” and the “Payment and Settlement System Act” are undergoing the necessary revisions to implement these provisions.