* Govt plans sales, income tax rebates on electronic
* Many merchants charge up to 3 pct on electronic payments
* Govt aims to curb tax evasion by encouraging cashless
By Manoj Kumar
NEW DELHI, June 23 India has unveiled plans to
cut transaction costs for electronic payments, to spur retailers
and consumers to use less cash, as part of Prime Minister
Narendra Modi's drive to pull more people into the formal
economy and boost public revenue.
India is among the most cash-intensive economies in the
world, with a cash-to-GDP ratio of 12 percent, almost four times
that of markets such as Brazil, Mexico and South Africa, global
payments company MasterCard estimates.
Many small Indian businesses and consumers now prefer cash,
to avoid high transaction costs of up to 3 percent on electronic
payments, as well as to escape sales tax.
In a draft proposal posted on the finance ministry website
late on Monday, the government recommended tax concessions to
reduce the cost of credit, debit and online payments. The
proposals will be implemented gradually after June 29.
If successful in increasing card payments, the new measures
will be a boost for global and debit card companies MasterCard
, Visa and American Express, as well as
domestic rival RuPay and mobile payment banks.
"It is a big economic reform of the Modi government that
will ease conducting business by consumers and merchants," said
A.P. Hota, chief executive of RuPay's parent, the National
Payment Corp of India (NPCIL).
NPCIL, with 165 million cards, expects a jump in business
once transaction costs are lowered, including those on state-run
Indian Railways and retail petrol pumps, he said.
Modi is also rolling out banking services for all households
and shifting the payment of state subsidies into people's bank
accounts, moves intended to deepen the financial system and
Finance Ministry officials said the central bank and telecom
operators had already been consulted on the new plan.
"The scheme aims to make the life of consumers easier," said
finance ministry spokesman D.S. Malik.
One proposal is to offer sales tax rebates of 1 to 2
percentage points to merchants who report at least half of their
transactions through online payments.
Consumers could get an income tax rebate for electronic
payment of a proportion of their expenses, the draft said.
(Reporting by Manoj Kumarl Editing by Frank Jack Daniel and