RBI Notification

CBDT to fine hefty fine penalty of Rs. 5000/day from February 1 for not accepting Digital Payments

not accepting Digital Payments

Finance Minister Nirmala Sitharaman in July Budget propounded, that the business establishments with annual turnover more than 50 crores 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.

In Circular No. 32/2019 issued by Central Board of Direct Taxes (CBDT) dated 30 December 2019 mentioned that Section 269SU is inserted in the Income Tax Act, 1961, see the Finance (No.2) Act 2019, read with section 295 of the Income-tax Act, 1961 (43 of 1961) provides that every person having a business turnover of more than Rs. 50 crore shall ‘mandatorily’ provide facilities for accepting payments through prescribed electronic modes.

The prescribed mode of payments for the purpose of 269 SU has been inserted in 119A.

Following electronic mode of payment has been recommended:

  • Debit Card powered by RuPay
  • Unified Payments Interface (UPI) (BHIM-UPI); and
  • Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”
electronic mode of payment

electronic mode of payment

Businesses or firms will be free to use any other electronic mode of payments apart from these. As per the Government agencies no Merchant Discount Rate (MDR) will be charged for electronic mode of payment.

  • From January 1, persons having business turnover over Rs 50 crore will have to provide the facilities for accepting payment through the “prescribed electronic modes.”
  • No Bank or System Provider can impose any charge on a person making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Act.
  • Any charge including the Merchant Discount Rate) will not be applicable on or after January 1, 2020, on payment made through modes specified in 119A.
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Penalty Provisions

“In order to allow sufficient time to the specified person to install and operationalize the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271 DB of the Act shall not be levied if the specified person installs and operationalizes the facilities on or before 31st January 2020. However, if the specified person fails to do so, he shall be liable to pay a penalty of five thousand rupees per day from 01 February 2020 under section 271 DB of the Act for such failure,” CBDT said.

The Central Board of Direct Taxes said that the Finance Act inserted section 271 DB in the Income Tax Act, which provides for levy of penalty of Rs 5000 per day in case of failure by the specified persons to comply with the provisions of section 269SU. The penalty will not be charged if businesses having turnover over Rs 50 crore install the “prescribed electronic modes” by January 31, 2020. If they fail to do so, a penalty of Rs 5000 per day from February 1 will be levied on such businesses.

According to Section 1OA of the Payment and Settlement Systems Act 2007, no Bank or system provider can impose any charge on a person making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Act. Also, any charge including the MDR (Merchant Discount Rate) will not be applicable on or after January 1, 2020, on payment made through the “prescribed electronic modes.”

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During a meeting between Finance Minister Nirmala Sitharaman and the Chiefs of Public Sector Banks last week, the issue of deducting MDR and the final date of its implementation was decided. Non- Bank Service providers are shocked by this decision. According to them, this decision will affect their further investment prospects.

Key Points:

  • No Merchant Discount Rate on either Customers or Business persons from January 1, 2020.
  • The above facility will be applicable only for Electronic Payment Modes like BHIM-UPI, UPI QR Codes, and Rupay Debit Card.
  • The Time limit to install this prescribed mode is January 31, 2020.
  • If any firm or business fails to follow this policy they will have to pay Rs.5000/day as fine.

Conclusion

This move is a step towards the Government’s Digital Payment Initiative. By cutting down Merchant Discount Rates (MDR) the business both the business persons and the customers are getting encouraged to use the Digital Payment method. The Government has also given time of one month to install the payment methods failing which firms/businesses will have to pay Rs.5000/day.

circular_32_2019

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