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Remove service tax for all card-based transactions: Rajib Saha, Indepay Networks

— By IIFL | January 30, 2017, 1:28 pm

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Digitisation of agriculture cooperative societies, regional rural banks, and cooperative banks should be encouraged in the Union Budget 2017. It should also provide unified single tax systems and incentives to investors.

According to reports, the transaction value of the Indian Fintech market is placed at $ 33 billion in 2016, with the sector estimated to grow at 22%. For the Fintech players, this budget would be seen as a very critical and crucial one. The push for cashless and digital is ostensibly great news for many in this area, but a central point is being largely missed. Cash can be replaced by any device, tool, process, or system only when that alternate can address all advantages that cash offers.

A removal of service tax in the case of all card-based transactions is essential. This exemption should, in fact, apply to banking correspondents as well, in order to extend the reach of financial inclusion to the remote and under-banked and non-banked areas of the country.

The Fintech industry is playing a demonstrably pervasive role in taking the mission of the PM to an effective execution plane. If the digitisation of agriculture cooperative societies, regional rural banks, and cooperative banks could be encouraged, the nation would definitely leap ahead with the subsequent boost in the economy as a whole. The industry is optimistic about many additional benefits for cashless transactions through mobile wallets, innovative digital payments, and transaction to this effect for all government agencies, including taxes, railways, utilities etc.

The on-going Skill India, Start-up India and so on have to be reenergised and actively operationalised. Start-ups in the Fintech sector need a lot of investment, and an appropriate climate in shape of unified single tax systems and incentives to investors will provide a boost and reverse the slow-down in this key investment silo.

Additional funds need to be made available by way of allotments and outlays particularly for public sector banks to boost for their e-wallets and encourage digital transactions, especially with the BHIM App under the UPI platform.

The Budget should also seek ways to kickstart an investment climate and encourage rule changes which can engender an enabling climate for seeding and growing fintech companies. The next phase of economic development will have to be based on clear inclusive parameters. Speed, accuracy and inclusion will be the whetstones on which the sincerity of fiscal reforms and the consequent success of the fintech sector will hinge.

The recent demonetisation exercise has paved a clear rail for banking and other NBFCs organisations to step up to the table and transform their business processes, and the eco-system in which they operate.

Overall, the budget for 2017-18 is largely expected to be a mix of comfort and compel. Comfort in the shape of higher tax exemption slabs, agriculture outlay and loan amelioration, reduction in corporate tax, DDT (dividend distribution tax), and MAT, of course. Well, and of course, the inevitable and inexorable slog-dash to cashless and demonetised. This last is the compelling inquest that all Indians are now expecting in the wake of the GST policy tectonics as well the impending elections in five states.