Union Finance Minister Nirmala Sitharaman said Friday that the central government believes that now is not the right time to make digital payments taxable.
Speaking at an event, Ms Sitharaman said: “We see digital payments as the public interest. People should have free access to it so that the digitization of the Indian economy becomes attractive. Also, through digitization we achieve a level of transparency that is so necessary.”
“That’s why we still don’t think it’s the right time to make it taxable. We’re more and more striving for open digital transactions, digitization and platforms that can enable good access. The RBI’s recommendation is to have a working document and leave the working document where it is,” the minister added.
Ms Sitharaman’s statement came against the background of the Reserve Bank of India (RBI) requesting public feedback on the various proposed changes to the payment system, including the possibility of imposing tiered fees for transactions sent through the Unified Payments Interface (UPI) are done.
However, the government of India announced last week that it will not charge for UPI (Unified Payments Interface) services.
As announced in its Dec. 8, 2021 Development and Regulatory Policy Statement, the Reserve Bank of India (RBI) has released a discussion paper on “Costs in Payment Systems” for public feedback, RBI said in a statement. The discussion paper was released on August 17.
The focus of RBI’s payment systems initiatives has been to reduce frictions that can arise from systemic, procedural or revenue-related issues.
While there are many intermediaries in the payment transaction chain, consumer complaints are generally about high and opaque costs.
Fees for payment services should be set reasonably and competitively for users while providing an optimal revenue stream for the intermediaries.
It was considered useful to review the different charges levied in payment systems by emphasizing different dimensions and seeking feedback from stakeholders.
The RTGS and NEFT payment systems in India are owned and operated by RBI.
Systems like IMPS, RuPay, UPI, etc. are owned and operated by the National Payments Corporation of India (NPCI), a non-profit organization promoted by banks.
The other entities such as card networks, PPI issuers, etc. are profit maximizing private entities.
Notably, the number of digital transactions in July was the highest since 2016. UPI reported 6.28 billion transactions amounting to Rs 10.62 trillion, according to data released by the National Payments Corporation of India (NPCI).