Team-BHP (https://www.team-bhp.com/forum/)

-   The Indian Car Scene (https://www.team-bhp.com/forum/indian-car-scene/)

-   -   0.75% discount for those who buy fuel using cards EDIT: Slashed to 0.25%! (https://www.team-bhp.com/forum/indian-car-scene/182412-0-75-discount-those-who-buy-fuel-using-cards-edit-slashed-0-25-a.html)

In the news -

'Finance Minister Arun Jaitley has followed up a tax break on credit and debit card transactions announced today, with a series of other discounts for people who make purchases digitally and not in cash. This includes a 0.75% discount for those who buy petrol and diesel using cards or other digital methods. Finance Minister Arun Jaitley made the announcements on Thursday as part of the government's bid to transition to a cashless economy. It is exactly a month since Prime Minister Narendra Modi banned 500 and 1000 rupee notes to unearth black or undeclared money'

Source - http://www.ndtv.com/india-news/finan...-lateststories

I believe the news report quote that this is effective immediately, I may be mistaken as there is another article about no ST on transactions worth 2k with cards.

They are puling things in multiple directions and I sure hope they do not lose sight of what they wanted to achieve by this whole inconvenience.

May I ask this,

How will this 0.75% Discount be applicable ?

Is it based on How much one fills ?
Or, does the Respective Bank that the Payee pays give cash back/points ?

Or will the Pump Attenders have to calculate the discounted price when entering the amount ?

One thing is for sure, this is a lot confusing. I have never used cards for paying Petrol/Diesel. Now, I will do only if I get some success/benefit from it. Let me see.

I always use credit card to fill up, as i get some tax benefit from my company for a set amount per month (not reimbursement, but a certain portion of the salary is withheld and released tax free to me later once the data is received from bank).
So I shall continue to use credit card.
But the question is how shall the 0.75% discount be applied? a credit entry in my credit card statement? or after i fill up, the pump attendant shall use a calculator to charge me 99.25% of the total amount?

As per news reports, the same would be applicable from Jan 1.
Also a 10℅ discount for payment done using cards for RFID and fast tags.

Not confirmed, but my thought is they are going to give a discount on the surcharge that is applied when fuel is bought through debit / credit card.
Second approach: The cashback will reflect back in card.

I've been using Citibank Indian Oil credit card for fuel since many years. I think I earn about ₹3,000 to 4,000 worth of petrol every year from the points I gain from all purchases (fuel, groceries, bills, etc.,).

Overall, I get about 4-5% cashback for fuel. With 0.75% more, that's going to be more beneficial, but it remains to be seen how this discount scheme is implemented. To be frank, 0.75 is too less to make any difference. Most public usually get their two wheelers filled up with ₹100-200 which gets ₹0.75 to ₹1.50 discount: very very insignificant.

Also Does No Service Tax for Digital Transactions up to Rs 2000 mean that our Restaurant Bills will come down. Does it apply to the service tax on the total bill amount or the transaction fee. If it is on total bill amount then this is a good step as it will result in significant savings on eating out.

Several discounts / benefits on using Cards, e-wallet etc. to make payments have been announced to move towards cashless (less-cash) economy. Economic times report. http://economictimes.indiatimes.com/...w/55875894.cms

I don't see how it will irritate customers (may be annoying for pump attendants). Petrol pumps can have two rates - regular one and discounted one. Best approach would be in the form of cash back. Nothing clear about the current surcharge being levied though. I always use CC/DC for buying fuel and the surcharge gets waived off later by bank.

Yes, full service tax will be waived off on transactions upto 2K, if paid electronically.clap:

I think we celebrated too soon A tweet from Smriti Irani said "no service tax on digital transaction charges" Does that mean no Service Tax on the nominal digital transaction Fee?:Frustrati

I think the discount is applicable only in State owned COCO fuel pumps.
Source: Today's 'The Hindu' (http://www.thehindu.com/todays-paper...le16780745.ece)

Or that is how I interpret it. Others views are welcome.

Well, ST waiver only on transaction charges makes little sense for card holders as they are mostly borne by service providers. We will have to wait for CBEC notification to get clarity.

Only this morning my friends and I had an heated argument about the benefits of this move.

Below is the explanation based on my understanding

As of now most cards (debit as well as credit) out there in the market have a surcharge of 2.5% or minimum Rs 10 on fuel transactions and a service tax of around 15% is applicable on the surcharge levied.

Illustration 1. If your bank has a surcharge, then for every Rs. 1000 of fuel you are charged Rs. 1028.75 (Rs. 1000 for fuel, Rs. 25 as surcharge and Rs. 3.75 as service tax)

Some cards offers surcharge waiver for transactions in the range of Rs 400 to Rs 2000. Here, the catch is even if surcharge is waived you will still be liable to pay the service tax.

Illustration 2. For every Rs. 1000 of fuel, you are initially charged Rs. 1028.75 (Rs. 1000 for fuel, Rs. 25 as surcharge and Rs. 3.75 as service tax). And after a couple of days you will get a refund of Rs. 25. So effectively you end up paying Rs. 1003.75.

There is a third type of card that does not charge a surcharge for any fuel transaction irrespective of the size of the transaction.
Illustration 3. For every Rs. 1000 of fuel, you are charged Rs. 1000.

But going forward with a discount of 0.75%, banks are going to charge us a lower surcharge and service tax will be waived for transactions less than Rs. 2000.

So now,

In case of Illustration 1. you will end up paying Rs. 1017.5 (Rs. 1000 for fuel, Rs. 17.5 as surcharge (1.75% instead of 2.5%)

In case of Illustration 2. you will end up paying Rs. 1000 (Surcharge will be reversed after a couple of days)

Only people with the third type of card are likely to benefit from the so called discount. They will be paying only 99.25% of the actual cost of fuel.
Illustration. For every Rs. 1000 of fuel, you are charged Rs. 1000 (Rs.7.5 will be reversed). effective price - Rs. 992.5.

Also regarding implementation, I think that the entire amount will be charged and the discount will be credited to the card/account after a couple of days like in case of Illustration 2.

To sum it up. If you are already using cards for fuel transactions, then you will be paying a lower surcharge.
if you are using cash for fuel transactions and plan to migrate to:
1. card (with surcharge) you will end up paying more.
2. card (without any surcharge) only then it will be beneficial.

I second your sentiments. Looks like policy is being made on the hoof. More like the captain of a cricket team moving a fielder in response to a boundary being hit. Lets hope that this latest announcement does not lead to further chaos. :D

My preferred mode of paying for petrol is a credit/debit card, so this should benefit people like me. Having said that my guess is that the full cost of the fuel will be debited at the time of the transaction and subsequently, the bank will credit the account. Like in the case of a surcharge waiver that users of some cards enjoy at certain pumps.

You are correct. I dont think it is applicable in the franchise pumps. A small minority of pumps are actually Company owned and operated. So this may be much ado about nothing