If demonetisation got ‘Acche Din’ for digital payment companies, further tax incentives and rewards are things these entities are hoping for in the upcoming Union Budget to ensure customers stick to digital payments instruments and don’t migrate back to cash.

Companies in this space are hopeful that the Centre will follow the South Korea model where their government succeeded to switch a major chunk of payments in the country to digital means through tax benefits for both merchants and consumers.

“The government of South Korea did the maths around the fact that the number of people coming into the tax nets incrementally because of digital payments and the cost of cash to the GDP reducing would offset the temporary hit that they had in terms of tax payments,” said TR Ramachandran, Group Country Manager, India and South Asia for Visa.

“I think this would be not only sustainable but also of great attraction for Indians who are careful about saving taxes under investments, home loans, etc,” he said. The payments industry through multiple meetings with Finance Minister Arun Jaitley is said to have presented various case studies of different countries to showcase a direct relation between tax benefits and uptick of digital transactions.

“Tax benefits from both sides — merchants as well as consumers — will get more people to transact digitally. Merchants can get discount on service tax, sales tax, etc. while consumers can get benefits on income tax,” said Paresh Rajde, Founder of Mumbai-based domestic remittance and payments company Suvidhaa Infoserve.

Global payments company Mastercard said that the government should focus on small merchants and promote digital payments among them to address issues around credit underwriting and on boarding for this sector. “One of the biggest resistance factors for consumers to adopt electronic payments is their fears around safety and security. It is critical that the government take the safety and security agenda very seriously and invest in technology and fraud protection tools,” said Porush Singh, Country Corporate Officer and division president South Asia for Mastercard.

Bankers said one major reason why merchants and small shopkeepers prefer to transact in cash is because they want to avoid tax net. Hence if they are given tax benefits on accepting payments digitally there would be more number of people taking it up.

The industry has also requested for extension of the import duty waiver on PoS terminals for card payments beyond March 31as it expects the demand for such terminals to go up. While industry executives seek more support from the government to promote digital payments, there is also talk around some mention of cyber security as there are security concerns around digital payments.

“Everything that the government has announced, from UPI payments to Aadhaar authentication, there are huge security concerns around its implementation,” said Bhavin Turakhia, chief executive at payments technology company Zeta. “The government needs to recognise such concerns for both cards as well as UPI,” he said.

Source: Economic Times