The government will waive service tax on debit and credit card transactions of up to Rs 2,000. The new move by the government is to promote digital transactions amid cash crunch following the withdrawal of old Rs 500 and 1,000 banknotes.

The government has decided to "exempt services by an acquiring bank to any person in relation to the settlement of an amount up to Rs 2,000 in a single transaction through credit, debit card or other payment card service", reports PTI.

A notification to this effect will be tabled by Finance Minister Arun Jaitley in Parliament. Following demonetisation of old high-value notes, there has been a cash crunch in the country as people have been making a beeline for banks and ATMs to withdraw new currency.

The government has been taking steps to promote cashless or digital transactions to take India towards a less-cash economy. Recently, the government asked banks to install additional 10 lakh PoS terminals by March 31 in different parts of the country.

The service tax notification of June 2012 will be amended to include the exemption on credit and debit cards, PTI reports. As of now, services provided by organizations such as United Nations and other international bodies are exempt from tax.

A range of other services provided by arbitral tribunals, testing of newly developed drugs, educational institutions, trade unions, general insurance business and sports bodies, among others, too are exempt from the levy.

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