Taking a note of banks levying charges for digital payment modes such as Unified Payments Interface (UPI) and others, the Central Board of Direct Taxes (CBDT) has asked lenders to refund such fees collected from customers since January 1. “… based on Section 10A of the Payment and Settlement Systems Act 2007, any charge including the MDR (merchant discount rate) shall not be applicable on or after 1st January, 2020 on payment made through prescribed electronic modes,” CBDT said in a circular.
“… representations have been received that some banks are imposing and collecting charges on transactions carried out through UPI. A certain number of transactions are allowed free of charge beyond which every transaction bears a charge. Such practice on part of banks is a breach of section 10A of the PSS Act (Payment and Settlement Systems Act 2007) as well as section 269SU of the IT Act. Such breach attracts penal provisions … banks are, therefore advised to immediately refund the charges collected, if any, on or after 1st January 2020 on transactions carried out using the electronic modes …,” the CBDT circular said.
Finance Ministry sources said that action will be taken against those banks, which will collect any charges on payments made through electronic mode.
To encourage digital transactions and move towards a less-cash economy, the government inserted a new provision, Section 269SU, in the Finance Act, 2019.
The prevalent laws require a person carrying on business and having sales/turnover/gross receipts from business of more than Rs 50 crore in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes. Subsequently, in December 2019, debit card powered by RuPay, Unified Payments Interface (UPI) (BHIM-UPI), and Unified Payments Interface Quick Response Code (UPI QR Code) were notified as prescribed electronic modes.
A technical report by IIT-Bombay published earlier this month showed that major private banks including HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank had been levying charges on UPI payments in excess of 20 transactions every month.
According to data published by the National Payments Corporation of India, which is the umbrella body for most cashless modes of payments, UPI-based payments clocked an all-time high of 149 crore transactions in July, with the value of transactions reaching Rs 2.91 lakh crore.
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