Circular 190/02/2023-GST, issued by the Central Board of Indirect Taxes and Customs (CBIC) on January 13, 2023, provides guidance on whether or not GST applies to a variety of services. This also includes clarification on applicability of GST on Incentive paid by MeitY(Ministry of Electronics and Information Technology) to acquire banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.
What are BHIM-UPI Transactions?
With the Bharat Interface for Money (BHIM) app, you may use the Unified Payments Interface to conduct fast, simple, and secure financial transactions. Payments between banks may be made instantly, and a mobile phone number or a virtual payment address can be used to send or receive funds (UPI ID).
What is a RuPay Debit Card?
Any financial institution from which you draw funds can issue you a RuPay Debit Card to use as a payment option. A debit card is connected to a bank account and may be used to make cash withdrawals from ATMs, Buying things from Point-of-Sale terminals and much more. In short, RuPay is the Global Card payment network from India.
Incentive scheme for promotion of RuPay Debit Cards
The government offers acquiring banks a reward for accepting RuPay debit card and low-value BHIM-UPI transactions up to Rs.2000/- as part of its incentive programme to promote these payment methods.
Requests for clarification whether GST is applicable on incentives offered by MeitY
The question of whether GST is applicable on the incentive granted by MeitY to acquiring banks under the Incentive scheme for promoting RuPay Debit Cards and low value BHIM-UPI transactions has been raised in correspondence.
Govt. Clarifies GST not applicable on incentives offered by MeitY
It is explicitly stated in the notification that incentives granted by MeitY to acquiring banks under the Incentive plan to promote RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and are therefore not taxable, as was proposed by the Council.
Reasons why GST not applicable on incentives paid by MeitY
In the digital payment system, acquiring banks supply the same service for RuPay/BHIM UPI transactions as they do for transactions made with any other card or digital payment method. The sole distinction is that the central government offers incentives in place of payment from the merchant or cardholder for such services. The Central Government does not pay this fee as payment for services rendered by the Acquiring Bank to the Central Government. According to Sections 2(31) and 15 of the CGST Act, 2017, the incentives are in the form of subsidies directly related to the pricing of the service and it does not form an integral part of the taxable value of the transaction. Hence, GST is not applicable on incentives paid by MeitY to acquire banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.
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