CBDT Notification for Digital Payment and advice bank to Refund Charges 

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In what will be a relief for merchants and buyers accepting or making digital payments, the Central Board of Direct Taxes has published a circular in which the council meeting members discussed CBDT Notification for digital payment.  

Let us understand in detail 

CBDT Notification for Digital Payment

CBDT notification for digital payment on 30th August 2020 notifying banks to immediately refund the charges collected on payments made via UPI, Rupay debit card, QR Code or as MDR on transactions collected, if any, on or after 1st January 2020 on transactions conveyed out using the electronic modes under section 269SU of the Income-tax Act,1961.  

Note – A assured number of transactions were permitted free by these banks beyond which every transaction bears a charge.

Before determining the new guidelines issued by CBDT, you need to understand the earlier criteria for imposing the MDR.

Know about MDR

MDR (Merchant Discount Rate) is the rate or processing fee charged to a merchant to assist the transactions made via credit or debit cards. The fee charged by banks that range between 1% to 3% of the overall cost. MDR was decreased to zero for UPI, Repay and QR Code by Finance Minister Nirmala Sitharaman in December 2019 and the exemption was applicable from January 1, 2020. However, some banks have been imposing a fee on UPI transactions as against in the circular. For which the CBDT has taken the following steps to encourage digital transactions and move towards a less-cash economy

Now discuss the Imposition of charge on the prescribed electronic modes under section 269SU of the Income-tax Act, 1961.

The imposition of a charge on the prescribed electronic modes

The main objective of the Government to encourage digital transactions and move towards a less-cash economy, the Finance (No. 2) Act 2019 inserted a new provision namely section 269SU in the Income-tax Act, 1961 (“the IT Act”), which renders that every person having a business turnover of more than Rs. 50 crores during the immediately preceding previous year shall necessarily provide facilities for accepting payments through prescribed electronic modes.

  • Debit Card powered by RuPay;
  • Unified Payments Interface (UPI) (SHIM-UPI); and
  • Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI DR Code)

They are notified as prescribed electronic modes under section 269 SU of the IT Act.

Additional Clarification on Digital payment

The CBDT Notification for Digital payment as follows:

  • Any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after January 2020 on payment made through prescribed electronic modes.
  • An assured number of transactions allowed free of charge beyond which every transaction bears a charge. Such method on part of banks is a breach of section 10A of the PSS Act as well as section 269SU of the IT Act.
  • Banks are notified immediately to return the charges collected if any, After 15 January 2020 on transactions carried out using the electronic modes of the IT Act and not to force charges on any future transactions carried through the said prescribed modes.

RBI clarifies Google Pay not a Payment System Operator

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