Improving the viability and sustainability of the Business Correspondent model in India can pave the way for government’s financial inclusion agenda. Explain (200 Words)
Refer - The Business Line
Enrich the answer from other sources, if the question demands.
Abdul hakkim 3 years
Please review mam/sir
Thanks
IAS Parliament 3 years
Good attempt. Keep Writing.
IAS Parliament 3 years
KEY POINTS
· Over 1.1 million Business Correspondents perform millions of such transactions every day all over India, bringing essential financial services to under-banked and unbanked citizens.
· It should not be a surprise, then, that in April 2020 they were recognised as essential service providers.
· Issues - The application of tax deducted at source (TDS) on cash withdrawals and the Goods and Services Tax (GST) on financial transactions conducted by BCs.
· For instance, services provided by a BC for accounts in rural areas and PMJDY accounts are subject to a nil GST rate.
· In most cases, it is impossible for citizens and BCs to avail themselves of the benefit of this provision.
· This is because a BC cannot determine whether the bank accounts that they service are rural or urban, since transactions conducted through IMPS only require the IFSC of the banking institution.
· There is a need for the RBI to examine whether the current implementation of GST regulations duly follows the principles of value-added taxation.
· BCs play an essential role to bring financial services to the poorest citizens and under-banked regions of the country.
Recommendations
· Ensure that all BCs are exempt from TDS
· Apply a nil GST rate to all transactions performed by BCs.
· Examine whether the current implementation of GST regulations follows the principles of value addition.
