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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.
The prescribed mode of payments for the purpose of 269 SU has been inserted in 119A.
Following electronic mode of payment has been recommended:
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.
“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.
Also, Read: New RBI Notification: RTGS Time Extended.
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.”
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.
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.
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