Payment Companies Face GST Demand Notices Over Transaction Fees
In recent developments, several prominent payment companies, including BillDesk and CCAvenue, have received Goods and Services Tax (GST) demand notices from authorities. These notices pertain to the fees charged by these companies from merchants for digital transactions that are less than Rs 2,000. As reported by the Economic Times on September 7, this situation was confirmed by Vishwas Patel, the Joint Managing Director of Infibeam Avenues, which operates the payment processor CCAvenue.
Background of the Demand Notices
The GST officials are reportedly seeking the collection of taxes dating back to the financial year 2017-18, the year the GST system was officially implemented across India. The focus of the dispute lies specifically on payments made via debit cards, credit cards, and net banking. Notably, transactions carried out through UPI (Unified Payments Interface) and Rupay cards are currently exempt from such tax implications.
Industry Response and Clarification
Industry leaders have pointed out that during the demonetization phase, the government issued a notification indicating that payment aggregators providing digital payment solutions should not impose GST on transactions amounting to Rs 2,000 or less. This raises questions about the current demand notices and the clarifications needed concerning the GST regulations surrounding digital payments.
Upcoming GST Council Meeting
This development comes just days ahead of an anticipated GST Council meeting scheduled to discuss a range of issues, including the specific GST treatment of digital payments made through payment aggregators like Pine Labs and Razorpay. The council is expected to provide clarity on whether these transactions below Rs 2,000 should indeed be subject to the 18% GST rate.
Current Exemptions and Their Implications
As it stands, payment aggregators that facilitate digital payments through mechanisms like QR code scanning, Point of Sale (POS) machines, and net banking are exempt from GST for transactions under the Rs 2,000 threshold. This exemption plays a crucial role in encouraging digital transactions and supporting small businesses as they navigate the digital landscape.
| Aspect | Details |
|---|---|
| Companies Involved | BillDesk, CCAvenue (Infibeam Avenues) |
| Year of Concern | 2017-18 |
| Transaction Types Under Dispute | Debit, Credit Cards, Net Banking |
| Exempt Transaction Types | UPI, Rupay Cards |
| Upcoming Meeting | GST Council Meeting |
| Current GST Rate for Digital Payments | 18% |
Looking Ahead
The outcome of the upcoming GST Council meeting will be critical in determining the future of digital payment transactions and the tax implications associated with them. It is essential for both payment companies and merchants to stay informed and prepared for any changes that may arise from this discussion, as it could significantly affect their operations and the overall digital payment ecosystem in India.
