Cashless economy: Naidu panel moots tax on cash withdrawals

Moneycontrol Bureau In order to boost the digital transactions in the country as well as to keep a check on the source of money, the government is planning to bring back banking cash transaction tax (BCTT) – a tax levied on cash withdrawals from banks above a certain limit. A committee headed by the Andhra Pradesh Chief Minister Chandrababu Naidu has recommended various ways in which cashless transactions can be made more attractive than cash transactions. The committee, which was formed in November 2016, has recommended relief in retrospective and prospective taxes to merchants to encourage digital transactions. Tax refund to consumers as well as tax incentives to micro ATMs are the other ways suggested by the above committee. Moneycontrol first published the story in December stating how the re-implementation of a BCTT-like method will make cash transaction less rewarding for the consumers. BCTT was first introduced in 2005, but was later withdrawn in 2008. Under this, a 0.1 percent tax was levied on cash withdrawals of Rs 50,000 and above from bank accounts in a day. BCTT, if implemented once again, will discourage cash transactions and give boost to electronic transactions, which is one of the main aims of the government's recent demonetisation drive. There could also be a move to push government sections like insurance and petroleum to digital payments. The committee, in its presentation to the government, has further suggested ways to strengthen the hardware and connectivity system that will boost the government’s dream of a no-cash economy.