Moving ahead on its Budget announcement, the government on Friday said banks or system providers will not impose charges or Merchant Discount Rate on customers as well as merchants on digital payments made to establishments having turnover over Rs 50 crore from November 1.
In a notice, Central Board of Direct Taxes (CBDT) has called for applications from banks and payment service providers operating an authorised payment system under the Payment and Settlement Systems Act 2007 who are willing that their payment system may be taken into consideration.
“In furtherance to the declared policy objective of the government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act 1971 vide the Finance (No 2) Act 2019, which provides that every person having a business turnover of more than Rs 50 crore shall mandatorily provide facilities for accepting payments through electronic modes,” the CBDT notice said. The new provisions “shall come into force with effect from November 1, 2019,” it said.
Noting that low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT and RTGS which can be used to promote less cash economy, Finance Minister Nirmala Sitharaman in her Budget speech in July had said that businesses with an annual turnover of over Rs 50 crore can offer these payments options and no charges or Merchant Discount Rate (MDR) would be imposed on them or their customers.
“I propose that the business establishments with annual turnover more than Rs 50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment,” she had said.
Following the announcement, amendments have been made in the Income-tax Act as well as in the Payment and Settlement Systems Act 2007.