GST council to consider incentive schemes to boost digital payments made by QR code

In a bid to give a fillip to the formal economy and curb the menace of fake invoices, the upcoming goods and services tax council is going to consider the proposal to extend discounts/ cash-backs for taxpayers making digital payments using the quick response (QR) code facility.

Sources in the know have told CNBC-TV18, "GST Council (GSTC) likely to discuss proposal to extend discounts for digital payments using QR code. The proposal has been moved by the central government as finance ministry feels this will help in wooing taxpayers to demand genuine bills and make them settle payments through digital format. The council will discuss the final contours of the scheme on September 20 in Goa."

According to the proposal, discounts/ cash-backs will be given to select taxpayers, which could be a mix of both merchants and consumers, those willing to share their GST identification Number (GSTIN) and Permanent Account Number (PAN) details, while making payments through QR code, sources added.

"These discounts or cash-backs are considered as rewards for the taxpayers and will not put any pressure on the GST Collections as well," sources said.

But how will government fund these cash backs/ discounts? As per the proposal, Centre will inform the GST Council to consider paying cash-back/discounts through the funds collected in consumer welfare fund rather than using funds from GST revenue collections, sources added.

​To facilitate this, it is understood that the revenue department has already started the discussions with Consumer Affairs department of central government, which is the custodian of this consumer welfare fund.

According to the law, up to 50 percent of Consumer Welfare Fund can be claimed by the revenue department, which can be spent towards consumer welfare/ awareness.

GST Council in the past has twice considered a proposal to incentivize digital transactions but it had got rejected as the revenue outgo was too huge. Also in the previous two proposals, the benefits of discounts/ cash-backs was to be given to all taxpayers using various modes of digital payments.

On the contrary, as per the new proposal, which will be considered in the upcoming GST Council meet, will talk about giving incentives to select random taxpayers, who can be selected through a computer based lottery system, sources added. The final call on the contours of the scheme rests with the GST Council.

Meanwhile, central government to pave way for this proposal has already done some homework.

Central government wanted to use the platform of Unified Payments Interface (UPI) to facilitate this scheme. To use this, finance ministry had moved the proposal to National Payments Corporation of India (NPCI) board for an approval.

Recently, NPCI members have given their nod to the proposal shared by the central government.

National Payments Corporation of India (NPCI) nod was important as it manages the UPI platform. "Members have given go ahead to the proposal saying that GST benefits should be extended to merchants and consumers who are willing to share their GSTIN and PAN details," sources added.

Tax experts feel the move is in the right direction.

Pratik Jain, Partner and Leader, Indirect Tax, PwC India says, "The Government perhaps believes that large GST evasion is taking place on Business to Consumer (B2C) segment. Therefore, it’s imperative that consumers ask for an invoice from vendors and transactions are reported to the authorities.  Incentivizing digital payment is a step in this direction.  In fact, world over Governments are trying to seek end consumer's help in creating a more compliant eco-system."

Abhishek Jain, Tax Partner, EY says: "It seems to be a very good scheme and if implemented well it should lead to more transactions coming in the tax net and offer benefits to the end customers in the form of discounts or cash backs"

“Digital payments would get a big boost if they are incentivised, however the technology platforms used for GST purposes should be adequately tested before launch.” Said M S Mani, Partner, Deloitte India.