State Finance Ministers to meet again in 10 days
The Group of State Finance Ministers, which met here on Friday to decide on providing a 2 percentage point concession in the GST rate for digital payments, could not reach a consensus.
“We need some more data to arrive at a decision,” Sushil Kumar Modi, Deputy Chief Minister of Bihar and Chairman of the Group of Ministers, told media persons after the meeting.
The second and final meeting is expected in 10 days. Amit Mitra, West Bengal Finance Minister, said international practices need to be studied. Punjab Finance Minister Manpreet Singh Badal suggested creating negative and positive lists for giving concessions.
The Minister’s panel was formed after the GST Council failed to take a decision at its May 4 meeting. The proposal envisages “a concession of 2 percentage point in the GST rate on B2C (business to consumer) supplies for which payment is made digitally (1 percentage point each from applicable CGST and SGST rates, subject to a ceiling of ?100 per transaction.” This scheme, however, will not be available to registered persons paying tax under the composition scheme.
Once this incentive kicks in, consumers will be offered two prices: One with the normal GST rate for cash purchases, and the other with GST lowered by 2 percentage points for digital payments. Thus, if the GST rate for the supply a goods/service is 18 per cent, and if payment is made digitally, the applicable GST will be 16 per cent.
The payment mode can be divided into two. The first comprises RTGS, NEFT, IMPS (Immediate Payment Service), NACH (National Automated Clearing House), NETC (National Electronic Toll Collection) and Closed Loop. This is not widely used. The second group, comprising UPI/BHIM/USSD, RuPay, AEPS, BBPS, debit/credit cards, m-wallets, PPC, internet banking, and mobile banking modes, is more popular.
Based on the IT Ministry data for 2017-18, digital transactions via the second group totalled 1,329 crore, worth ?135.4 lakh crore. If payment for 40 per cent of all purchases is made digitally, and the average size of the transaction on which the concession is allowed is ?1,400, the revenue implication would be ?1,50,00 crore.
The government feels the loss in tax revenue may be made up with better compliance.