Cabinet approves proposal to withdraw service charge on digital payments

The Union Cabinet has approved a proposal to withdraw the surcharge/service charge or convenience fee on digital payments. The directive will apply to all kinds of digital payments like credit/debit cards, pre-paid cards, mobile payments or mobile wallet payments for any government service.

Many small retail stores and merchants charge an additional surcharge in case of non-cash payments. For instance, if you purchase anything using your credit card, a certain percentage of the transaction value was subject to either 2.5% of the transaction or a flat fee of Rs10-Rs25 (whichever is higher) depending on the bank. Some banks offered a waiver on the fuel surcharge, but these are for certain specified bands, say, between Rs400 and Rs4,000. Therefore, any transaction below Rs399 or above Rs4,000 will continue to be charged.

To reduce cash transactions, the government is also considering mandating payments beyond a prescribed threshold only in card/digital mode.

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