Budget FY26: Cash payment for petrol, retail purchases to attract additional taxes

In a bid to promote digital payments and reduce reliance on cash transactions, the federal government is set to introduce a dual pricing and taxation regime in the upcoming 2025–26 budget, according to reports.

Under the proposed framework, government-notified fuel prices will apply exclusively to digital payments. Customers opting to pay in cash at petrol pumps may face an additional charge of Rs2 to Rs3 per litre.

Fuel stations will be mandated to provide QR codes, card terminals, and mobile payment options alongside traditional cash payment facilities.

As part of broader tax reforms, income tax rates for salaried individuals are expected to be reduced by 1 to 1.5 percentage points.

The new policy will differentiate taxation based on the mode of payment. Digital transactions will continue to be taxed at the standard 18 percent General Sales Tax (GST), while an extra 2 percent GST will be levied on cash-based transactions.

Importers and manufacturers will be obligated to extend this pricing structure to their downstream retailers and suppliers.

Additionally, all businesses—regardless of size—will be legally required to accept both digital and cash payments. Businesses may use QR code-based payment systems to comply, avoiding the higher cost of point-of-sale (POS) terminals.

Officials believe the initiative will raise the cost of undocumented cash transactions and incentivize businesses and consumers to shift towards traceable digital payments, thereby expanding the formal economy and improving revenue collection.

The dual-pricing strategy is also expected to enhance transparency in the petroleum supply chain.