service tax Litigation & Safeguard in IndiaNo Service Tax on Card Transactions of upto Rs 2000

December 9, 20160
No Service Tax on Card Transactions of upto Rs 2000
It can be seen as a demonetisation effect  that Government has exempted Service Tax on Card Transactions of upto Rs 2000. It is an effort to make cashless economy a reality in India.
Legality of Service Tax Exemption
The service tax notification no. 52/2016-Service Tax dated 8 th December, 2016 amends the service tax notification no. No.25/2012-Service Tax, dated the 20thJune, 2012 as below
 In the said notification, in the opening paragraph, after entry 63, the following entry shall be inserted, namely,-
“64. Services by an acquiring bank, to any person in relation to settlement of an amount upto two thousand rupees in a single transaction transacted through credit card, debit card, charge card or other payment card service.
Explanation. — For the purposes of this entry, “acquiring bank” means any banking company, financial institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card.”
On perusal of the same, it can be seen that the providers identifed are as below : 
a. credit card
b. debit card
c.charge card or
d.other payment card service.
Further, the acquiring bank has been defined to include e-wallets as well.
Facts of Cashless Transaction
It must be known that country like US has 45% cashless transactions. Singapore tops the list with 61% cashless transactions. Whereas, India has 2% of cashless transactions .


7-United Kingdom
11-South Korea
Source: Mastercard Advisor’s Measuring progress toward a cashless society
The challenges will in villages and also to change th mindset of people as they prefer to trasncation in cash rather than going to bank or to hook on any other thing for making payment.
There will be  requirement of a will and an extra effort  from every person to make cashless transaction a reality in India upto the extent it can be achieved.


The factor of compulsion & choice will be  also very important aspect to make cashless transaction in practice for a common man of India.
Therefore, the Governement has also come up with various incentives to compel people to opt for cashless trsanction as below:

a.The Central Government Petroleum PSUs shall give a discount at the rate of 0.75%  on purchase of petrol/diesel if payment is made through digital means.

b.NABARD will extend financial support to eligible banks for deployment of 2 POS devices each in 1 Lakh villages with population of less than 10,000.

c.Railway will extend a discount upto 0.5% to customers for monthly or seasonal tickets from January 1, 2017,provided the payment is  through digital means.

d.All railway passengers buying online ticket shall get free accidental insurance coverage upto Rs. 10 lakh.

e.Services like catering, accommodation, retiring rooms etc. being offered by railways through its affiliated entities/corporations to the passengers, will also offer a  discount of 5% if payment is through cashless manner.

g.Public sector insurance companies will extend discount or credit, upto 10% of the premium in general insurance policies and 8% in new life policies of Life Insurance Corporation sold through the customer portals.

h.Public sector banks will not charge Rs. 100 per month as monthly rental for PoS terminals/Micro ATMs/mobile POS from the merchants so that more  small merchant comes on board of eco system of digital payment .
These incentive measures will also play an  important role in the regime of GST.
This move will also prepare India with the transactions of future in GST era.
We further feel that e-commerce,retail sector, fmcg,logistics,aggregators etc will get big boost with such moves.
Hence, how India takes this challenge versus adaptability will be a million dollar question.But, levy of no service tax on card transactions of upto Rs 2000 will be a welcome move for sure.
By Anandaday Misshra, Founder Advocate, AMLEGALS

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