Little to cheer if you buy fuel on card

CHANDIGARH:To promote the use of digital payments, Finance Minister Arun Jaitley yesterday announced a slew of measures, including 0.75% discount on purchase of petrol and diesel and waived service tax on transaction up to Rs 2,000 by using credit/debit cards, e-wallets and mobile wallets.

Vijay C Roy

Tribune News Service

Chandigarh, December 9

To promote the use of digital payments, Finance Minister Arun Jaitley yesterday announced a slew of measures, including 0.75% discount on purchase of petrol and diesel and waived service tax on transaction up to Rs 2,000 by using credit/debit cards, e-wallets and mobile wallets. However, the customers using credit card or debit card will not benefit much as currently they have to pay fuel surcharge, which is usually 2.5% and service tax.

In case of credit cards, the charges hover between 0.75% and 2.5%, depending upon the nature of the card. For example, if a customer needs to buy fuel for Rs 1,000 with a credit card, he needs to pay the cost of fuel besides fuel surcharge and service tax on surcharge i.e Rs 1,000+Rs 25+ Rs 3.72=Rs 1,028.72.

Now with the waiver in place, the customer will get a discount of Rs 7.5 for every transaction of Rs 1,000 and service tax exemption up to a transaction of Rs 2,000, which means he will have to pay Rs 1,017.31. If he purchases the fuel for more than Rs 2,000 then the service tax will be levied.

Bankers said, “While some of the banks charge transaction charges on debit cards ranging between 0.75% and 2.5%, some banks don’t charge at all.”

Petrol pump dealers said fuel business operates at a very low margin and they can’t absorb this transaction charge as it hits their profit margin. So the transaction charges on fuel purchases are passed on to customers.

Fuel surcharge waiver on credit cards

Many credit cards offer fuel surcharge waiver benefit. “It’s true that some banks offer waiver on surcharge. However, they don’t waive the service tax levied on surcharge,” said another banker.

For example, if you spend Rs 1,000 on fuel every month, the customer ends up paying extra Rs 25 (surcharge)+Rs 3.71 (service tax) = Rs 28.71. The Rs 3.71, which is service tax, is normally not waived by the banks. But now it will be waived.

Cap on surcharge waiver

Most credit cards waive fuel surcharge within a certain limit per transaction. Usually, it is between Rs 100 and Rs 300 per billing cycle.