It has decided not to levy the 2 per cent tax deducted at source (TDS) on cash payments above Rs 1 crore made through Agricultural Produce Market Committees.
The government on Monday gave boost to liquidity in the farm sector ahead of the kharif harvesting season.
It has decided not to levy the 2 per cent tax deducted at source (TDS) on cash payments above Rs 1 crore made through Agricultural Produce Market Committees (APMCs).
The government also gave 15 percentage points additional depreciation rate to commercial vehicles, taking it to 45 per cent.
These would be available for vehicles bought between August 23 and March 31 in the current fiscal year.
Depreciation helps companies reduce tax liabilities.
“It has been decided not to levy 2 per cent TDS on cash payments above Rs 1 crore made through APMCs, in order to make immediate payments to farmers for their produce,” the finance ministry said in a tweet.
For all other purposes, cash payments over Rs 1 crore will continue to attract a TDS of 2 per cent, which was announced in the 2019-20 Union Budget by Finance Minister Nirmala Sitharaman as a measure to promote a less-cash economy.
But sources said the move backfired in the wholesale markets and APMCs, where large quantities of transactions are done in cash.
The step also threatened to lock liquidity from flowing into the hands of several ancillary sectors dependant on mandis like transport operators, casual labourers, along with farmers, as TDS refunds would have come into the account a year later.
Officials said in several mandis of Maharashtra, cash had simply dried up due to the notification which had come into force from September 1, 2019.
Traders were wary of making cash payments in excess of Rs 1 crore.
Traders in Saurashtra recently protested the TDS move and suspended APMC transactions.
The kharif harvesting season starts around October.
Meanwhile, the ministry in another tweet said an additional 15 per cent depreciation will be allowed on commercial vehicles.
“The move is expected to give a boost to the automobile sector by driving sales,” Sitharaman added.
She had announced the doubling of depreciation rate to 30 per cent for vehicles bought until March 31, 2020.
Photograph: Munish Sharma/Reuters