In an attempt to promote digital transactions amid cash crunch following currency ban, the government is all set to waive service tax on debit and credit card transactions of up to Rs 2,000.
The government has decided to "exempt services by an acquiring bank to any person in relation to settlement of an amount up to Rs 2,000 in a single transaction transacted trough credit, debit card or other payment card service", sources said.
A notification to this effect will be tabled by Finance Minister Arun Jaitley in Parliament.
Following demonetisation of old high value notes, there has been a cash crunch in the country as people have been making a beeline for banks and ATMs to withdraw new currency.
The government has been taking steps to promote cashless or digital transactions to take India towards a less-cash economy.
Recently, the government asked banks to install additional 10 lakh PoS terminals by March 31 in different parts of the country.
The service tax notification of June 2012 will be amended to include exemption on credit and debit cards, the sources added.
As of now, services provided by organisations such as United Nations and other international bodies are exempt from tax.
A range of other services provided by arbitral tribunals, testing of newly developed drugs, educational institutions, trade unions, general insurance business and sports bodies, among others, too are exempt from the levy.
Yesterday, the RBI had relaxed norms for additional factor of authentication (AFA) for payments up to Rs 2,000. It means that PIN authentication is not required for transaction up to Rs 2,000.
The RBI on Tuesday said only authorised card networks will provide such payment authentication solutions with participation of card issuing and acquiring banks.
