Recently, a proposal to provide tax incentives on digital payments through QR code on United Payments Interface (UPI) has been approved by the National Payments Corporation of India (NPCI), which manages the platform.
This will benefit the end customers and merchants immensely as they will get some portion of GST (paid on a product or service purchase) back in the form of cashback. By sharing the PAN and GSTIN details, the customers and merchants would be able to claim tax benefits respectively as per the NPCI committee panel. This has come at a time when UPI has emerged as the most popular payment method. UPI transactions have touched the 918 million mark in the last month itself.
The PAN data of consumers will be stored in an encrypted format with NPCI. From the NPCI sources, it has also been revealed that an implementation plan to turn this into reality by 2020 is also going to submit by NPCI to the government. Although no formal timeline has been crafted till now. UPI transactions have risen disruptively in last one year and are also challenging the popular digital payment instruments like debit or credit cards.
A confidential source from NPCI also said, “This proposal first came from the department of revenue, and it was then discussed among the steering committee members. Upon the availability of GSTIN for the merchant entity and PAN of customers, they should be able to get such tax benefits. It was made clear that this should be collected on the basis of consent only.”
During the NPCI committee meeting, the members have also discussed to implement this idea into stages wherein the first phase will include merchants, and the later phase will involve customers. In this way, the overall implementation process could be fast-tracked easily. Two banks will be involved initially to test the proof of concept. Some other NPCI members also suggested that this would be like cashback in the end.
Through the idea of paying a percentage of the GST (paid against product or service purchased by customers) back to consumers, NPCI aims to boost digital payments, tax compliance for merchants and further adoption of UPI QR codes. Although, the number of incentives would depend on multiple factors, including transaction size, which is yet to be decided by the NPCI committee.
