The government is setting up a committee to that will come out with structures that can be put in place to encourage use of credit or debit cards. One of the measures is to make mandatory, credit card payments for transactions over Rs.5000 at five star hotels. Here’s a news story with all the details.
This is a welcome development. I had written about large scale tax evasion by restaurants and hotels, in my letter to the Prime Minister’s Office.
To quote from my letter:
Today a salaried person who has dinner out with his or her family often doesn’t leave with the restaurant’s bill. Restaurants often tear up or modify the bills to under-report sales. This causes losses of not only direct taxes but also indirect taxes such as VAT (Value added tax) and service tax. When credit cards are widely used, this malicious practice will be curtailed. The tax revenue generated will also indirectly help infrastructure growth and result in lower our cost of production, thereby enhancing our competitiveness.
I had written about the need for lowering credit card interest rates, increasing credit card penetration in the country and preventing tax evasion.