The Central government has proposed a two percent discount on the Goods and Services Tax (GST) for consumers transacting digitally reports Business Standard. The proposal will likely be discussed during the next GST Council meeting that will take place in January. The proposal was on the agenda of the previous meeting in November but couldn’t be taken up.

If approved, the proposal will boost the government's endeavour to transit to a cashless economy. The discount will be applicable to business-to-consumer (B2C) transactions for all goods and services that fall under a GST slab higher than 3 per cent and will include a 1 per cent discount on Central GST and another 1 per cent on State GST.

“The idea is to encourage digital transactions, and what better way than to incentivise them. The move will help increase the size of the formal economy as consumers will demand digital payment options from retailers”, said an official.

The proposal, if it comes into force, will see an effective reduction of GST on items under the 18 per cent slab to 16 per cent and 28 per cent slab to 26 per cent. However, there is a rider – the maximum concession will be up to Rs 100 per transaction. Thus, any goods or services sold for say Rs 5,000 will be eligible for a full Rs 100 discount.

The discount, however will not be available for retailers registered under the composition scheme that has a flat tax rate. While the government is expected to forgo some revenue on account of the discount, increased compliance is expected to make up for it.