94. FASTag
The Govt of India is planning to spend Rs.1435 Crore on New PAN 2.0 that will ‘streamline tax’.
What does that mean? — If PAN did the job of ‘shaving’ then new PAN 2.0 will do ‘waxing’!!!
Hey… no worries… rejoice in the fact that PAN 2.0 has QR… Yes, one more QR in our life… Hurray!
I have mixed feelings about income tax… I feel good because at least I am earning enough money so it is taxed, and I feel sad because the Govt takes a big chunk of my earnings and I do not get much in return.
“Hey… Hey… Government builds nice roads for us”
Yes… National Highways are quite nice (Except a few bad stretches, on-going constructions and random potholes).
But again, I pay a toll (tax) to use those roads.
From my home (Bangalore) to my native Athani (Belgaum District), I pay roughly Rs.750 in toll to use ~650 KM road, which has roughly 16 construction spots. (as on Nov’2024)
Charging people for using the road is not new.
Toll collection existed since 2700 BC, and there is mention of toll tax in Chanakya’s Arthashastra.
In modern India, tolls were there on National Highways, just that we were paying in cash (where there is cash, there will be some or other shady things) and long vehicle queues at toll plazas (longer time to give change).
Since the dawn of time, monarchy/kings and later governments have been efficient in collection of taxes. So in 2016, NPCI launched NETC FASTag, to enable digital collection of toll.
Vehicle will have FASTag and wallet linked to it. The user will load funds to the wallet, and the toll plaza will have a Tag reader and the toll amount is debited from the wallet based on vehicle type.
Of course, toll tax payment is exempted for few (politicians, bureaucrats)!!!
FASTag Transaction:
Operations:
A. Settlement:
- Settlement is managed by EGCS (ETC Global Clearing and Settlement) system
- Tag issuer will settle to acquirer via EGCS system (happens 3 times in a day)
- Acquirer will settle funds to Toll plaza’s account
B. Chargebacks/Dispute:
- Customer → Tag issuing bank → NPCI → Acquiring Bank
- If a customer is not happy with the resolution then he/she can raise pre-arbitration and arbitration
As of Nov 2024, 38 banks have issued 101.75 million tags; 12 acquiring banks have collected Rs.63.35 Thousand Crores toll since Jan to Nov 2024. Wow! (Source: FASTag data)
FASTag is now gone beyond the roads, and is used in parking lots of malls.
No need to queue up while leaving malls or getting into arguments with mall cops about miscalculation. Just debit and move out!
FASTag Recharge
You can top-up your FASTag on the FASTag issuer’s site/App or 3rd party Apps (goes via Bharat Connect/BBPS flow).
Monthly Pass: Power users (who cross certain toll plazas regularly) can avail FASTag monthly pass that is managed by IHMCL.
Auto Top-up: Frequent users of FASTag may want a feature of auto top-up of FASTag wallet. Say, whenever the wallet balance hits Rs.100 then top-up the wallet with Rs.1000.
FASTag Wallet top-up (refer to green box) where top-up amount is fixed but frequency is variable (the wallet balance threshold can reach Rs.100 any time).
Requirements of auto top-up of FASTag wallet
- Instant debit status (so wallet balance is updated immediately)
- No pre-debit notification (PDN) [balance may hit threshold any time and need top-up without delay]
As you are aware, we have 4 recurring payment solutions — NACH (paper), NACH (Digital), SI on Cards and UPI AutoPay.
- NACH (Paper based) is ruled out — semi-digital, delay is registration and debit status
- NACH (digital) is good solution — It doesn’t have requirement of Pre-debit notification but the status is not real time
- SI on cards is not ideal because PDN to be sent to customer 24 hours prior to debit
- UPI AutoPay is not ideal because PDN to be sent to customer 24 hours prior to debit
So, to address this, RBI gave exemption for recurring payment solutions from sending PDN for top up of FASTag wallet and National Common Mobility Card (NCMC).
Now… UPI AutoPay can be the ideal solution for this use case.
If you are a frequent traveller (by road) then you can set-up a mandate to top-up FASTag wallet on UPI AutoPay.
Note: The blue quadrant is an interesting use case. UPI’s SBMD (Single Block Multi Debit) can be a good fit for these use cases.
Initially, SBMD was meant only for investment merchants (secondary market i.e. share/stock purchases), but NPCI is rolling it out for other sectors — eCommerce/quick commerce category which can solve issues of refunds and provide faster checkout experience. [Will talk about it some other time]
Murphy’s Rule:
FASTag or not… the queue you are in always moves slower :)
