The Cash-less incentives
By: Amit Bhushan Date: 28th Dec. 2016
The Government seems hard pressed to counter allegations on Demonetization. It has made appoint to press for Cash-less transactions. On this count, it has taken several measures to incentivize users of Cash-less mode. The primary ones being 0.75% incentives to pay for transportation fuels payments via cash-less mode and upto 2% lesser rates on small business profit assessment (for turnover upto 2Cr.) provided such receipts are via cash-less modes. While the coverage seems to be large since fuels are consumed by a large cross-section of people and quite a few may be having cards wallets but have been reluctant to use the same. Similarly quite a few compliant and semi-compliant small businesses may benefit from Income Tax related benefits on account of cash-less receipts. It has also looked to re-tweak the Payments of Wages act to allow for Wages to be paid via Cash-less especially for the sectors where hitherto such payments were traditionally via the Cash payment method.
However it has not looked deeply into what can catapult the cash-less over a large scale. Say if there is an incentive for corporates of say 0.25%-0.50% lesser Income Tax rate provided over 99.5% of all corporate expenditure is via Cash-less mode only. The implementation can be via bank certificates that the total withdrawal from the corporate account for the year either by self or bearer chaques has been less than 99.5% (to be submitted from all bankers to the corporate). While there might be a small impact on the Tax collection however there would be far greater compliance and an improvement in Cash-less transactions as well as in banking. Various small units who were hitherto providing good and services for cash would be prompted to report such transactions and pay necessary taxes on the same which would mean an upswing on service tax / excise/VAT etc. and the government would benefit on this count. It would also ensure that corporates pay nearly all their permanent as well as temporary labour by the cash-less mode. In fact, pretty soon the parties in support for cash-less would take to questioning on government not resorting to such moves in its drive for cash-less. This is because the netas have now started point towards the corporate sector for some of these ills.
Such moves which would have higher impact than lottery schemes and prompt corporates to push for compliance and also help identify those which may not be gunning for the same. What is also needed to be considered is that charitable non-tax paying institutions are also drawing most of their large transactions via non-cash modes say all fee above INR 2000/- to be collected via non-cash mechanisms for the benefits to stay and similarly all expenses or almost 90% of the expenses to be paid via non-cash mode. A wider adoption of the cash-less would ensure greater penetration of banking as well as improved bankability on account of reporting of economic activity. Failing on such counts might allow some of the other parties to catapult themselves on Cash-less bandwagon, even as some others might continue with their opposition of demonetization and rob netas of some of the winning planks in the defense of demonetization.
By: Amit Bhushan Date: 28th Dec. 2016
The Government seems hard pressed to counter allegations on Demonetization. It has made appoint to press for Cash-less transactions. On this count, it has taken several measures to incentivize users of Cash-less mode. The primary ones being 0.75% incentives to pay for transportation fuels payments via cash-less mode and upto 2% lesser rates on small business profit assessment (for turnover upto 2Cr.) provided such receipts are via cash-less modes. While the coverage seems to be large since fuels are consumed by a large cross-section of people and quite a few may be having cards wallets but have been reluctant to use the same. Similarly quite a few compliant and semi-compliant small businesses may benefit from Income Tax related benefits on account of cash-less receipts. It has also looked to re-tweak the Payments of Wages act to allow for Wages to be paid via Cash-less especially for the sectors where hitherto such payments were traditionally via the Cash payment method.
However it has not looked deeply into what can catapult the cash-less over a large scale. Say if there is an incentive for corporates of say 0.25%-0.50% lesser Income Tax rate provided over 99.5% of all corporate expenditure is via Cash-less mode only. The implementation can be via bank certificates that the total withdrawal from the corporate account for the year either by self or bearer chaques has been less than 99.5% (to be submitted from all bankers to the corporate). While there might be a small impact on the Tax collection however there would be far greater compliance and an improvement in Cash-less transactions as well as in banking. Various small units who were hitherto providing good and services for cash would be prompted to report such transactions and pay necessary taxes on the same which would mean an upswing on service tax / excise/VAT etc. and the government would benefit on this count. It would also ensure that corporates pay nearly all their permanent as well as temporary labour by the cash-less mode. In fact, pretty soon the parties in support for cash-less would take to questioning on government not resorting to such moves in its drive for cash-less. This is because the netas have now started point towards the corporate sector for some of these ills.
Such moves which would have higher impact than lottery schemes and prompt corporates to push for compliance and also help identify those which may not be gunning for the same. What is also needed to be considered is that charitable non-tax paying institutions are also drawing most of their large transactions via non-cash modes say all fee above INR 2000/- to be collected via non-cash mechanisms for the benefits to stay and similarly all expenses or almost 90% of the expenses to be paid via non-cash mode. A wider adoption of the cash-less would ensure greater penetration of banking as well as improved bankability on account of reporting of economic activity. Failing on such counts might allow some of the other parties to catapult themselves on Cash-less bandwagon, even as some others might continue with their opposition of demonetization and rob netas of some of the winning planks in the defense of demonetization.