Government will waive off service tax on debit and credit card transactions upto Rs 2000 to encourage digital transactions following the withdrawal of Rs.500 and Rs.1000 notes.

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

A notification to this effect will be tabled by finance minister Arun Jaitley in Parliament.Due to demonetisation of old high value notes, there has been a cash crunch in the country as people have been making a line 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 cashless economy.

 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 exemption on credit and debit cards, the sources added.