This is Huge! Service Tax Waived Off On Card Transactions Below Rs 2000


Service Tax in India-003

As per Reserve Bank of India’s 2015 report on digital transactions, it was revealed that a typical debit card transaction in India was valued at Rs 1485, while for a credit card, this amount was Rs 3089.

This means that most of the digital transactions (between 50-60%) in India are actually sub-Rs 2000 value, and this fact hasn’t been ignored by the Indian Govt.

In one of the major victories for a cashless economy, Govt. of India has decided to waive off service tax applicable on sub-Rs 2000 card-based transactions – this is applicable for both debit and credit card. But going by the demographics of users, it would be the debit card holders who shall be most benefitted by this change.

A source said that Govt. 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 through credit, debit card or other payment card service.”

Finance Minister Arun Jaitley would table this proposal in the Parliament to make the necessary amendments in the rules governing service tax in India. A previous Service Tax notification of 2012 would be amended to make the necessary changes.

As of now, only known international bodies such as United Nations are exempted from service tax, which would be now extended to all sub-Rs 2000 card based transactions. Besides, bodies such as arbitral tribunals, testing of newly developed drugs, educational institutions, trade unions, general insurance business and sports bodies are also exempted from service tax as of now.

This major decision has been taken to encourage cashless transactions, and to manage the lack of currency in the market. As more people start using their debit cards, credit cards and mobile wallets, the dependency on cash would reduce.

Cashless Push Continues..

Besides waiving off service tax, Govt. has recently taken two important decisions for pushing cashless economy:

– More PoS: India has one of the lowest penetration of Point of Sales terminals, which can accept debit card/credit card payments. As per Ernst and Young report (2015), Brazil has 32,995 terminals per 10,00,000 people while China and Russia, has around 4000 terminals per million citizens. Comparably, India has only 693 PoS terminals.

In order to push the penetration, Govt. has recently asked banks to install 10,00,000 PoS terminals across their branches. There are currently around 15 lakh PoS with various merchants across India.

– No OTP for sub-Rs 2000 cashless payments: Yesterday, we reported that for sub-Rs 2000 transactions, there shall be no OTP. Hence, both time and money is being saved by going cashless.

Do you think that waiving off of service tax on card payments will lead to more cashless transactions? Do let us know by commenting right here!


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  1. V G S BHATNAGAR says

    Those who are already using plastic cards, will certainly be benefited. Govt. should take steps to educate the mass regrading how to use the plastic card in day to day transaction through media.

  2. Santokh Saggu says

    Don’t be so happy ? The government is like girlfriend . It may make a U-Turn anytime !! Currently the Governments Focus is to handle the cash crisis , so it is offering Lollypop !!

  3. Atul says

    This is good step by Government, at least our farmers tend to use debit cards.

  4. Mukesh Samdani says

    why only Rs 2000
    There should be no limits
    if we want to encourage Cashless transactions

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