New Delhi: The Goods And Services Tax Council on Saturday cleared an important proposal to offer cashbacks to consumers on trial basis for all the payments made through digital mode through Rupay cards, BHIM app and UPI system to promote cashless transactions in rural and semi-urban areas.

Volunteer states would will announce schemes with incentives on pilot basis for all digital payments, and the GSTN, the IT backbone of the GST network, and the National Payments Corporation of India will also develop a system soon for the same, Finance Minister Piyush Goyal told reporters after the GST Council meeting in Delhi.

Once the plan is implemented, customers making any type of payments through Rupay card and BHIM UPI, would get a cashback of 20 per cent of the total GST amount, subject to a maximum cap of Rs. 100, Mr Goyal said, while terming the move as a step towards formalisation of the economy.

“We have decided to undertake a pilot project. A broad framework has been worked out so that users of Rupay debit card, BHIM, Aadhaar, UPI, USSD transactions can be given the incentives because these are mostly used by poor people,” Mr Goyal said.

A team of ministers along with Bihar deputy chief minister Sushil Modi, had yesterday worked out the cash back mechanism and had assessed that the total revenue loss on account of it would be Rs. 1,000 crore annually.

“The Council has decided to prepare the software and backend for this (cashback incentive) and whichever state volunteers for it, the pilot can be run in that state itself and impact on revenue can be assessed,” Mr Goyal said.

The GST Council also set up a small six-member panel of ministers under Minister of State for Finance Shiv Pratap Shukla to see the issues involved withthe MSME sector.

Other members who are related with the ministers’ panel are Delhi Deputy Chief Minister Manish Sisodia, Bihar Deputy Chief Minister Sushil Modi, Assam Finance Minister Himanta Biswa Sarma, Kerala Finance Minister Thomas Isaac and Punjab Finance Minister Manpreet Singh Badal.

Along with that, law and procedure as well as rates related to the issues for the MSME sector would be considered in very detail by the law committee and the Fitment Committee comprising central and state tax officers. They will give their own recommendations to the GoM, Mr Goyal said.

The ministerial panel is also expected to finalize its whole report within six weeks.

On the issues faced by MSMEs in the country, Mr Sisodia said ever since the Goods and Services Tax (GST) has been rolled out, there were concerns of the sector.

In the pre-GST regime, small businesses with a total turnover of up to Rs. 1.5 crore were exempt from excise duty.

“While on one side there are big businesses who give more taxes, but then on the other side there are small businesses who are large in number, who gives employment. Both have to be given importance.

“Rule should not be such that we brainstorm for those who give more tax to government, and small business just continue to pay taxes,” Mr Sisodia said, adding the GST Council will work out a framework to support MSMEs.

Punjab Finance Minister Manpreet Singh Badal also said that all the small and medium enterprises provide 70-80 per cent employment in the country, but they were suffering huge losses.

“What has been decided is that GoM within next six weeks will give a report on how do we enable industries to compete and what are the processes which are destabilising the smaller players,” Mr Badal said.

The next meeting of the GST Council is slated to be held on September 28-29 in Goa.

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