Delivering on government’s policy objective of building a cashless economy, the Central Board of Direct Taxes(CBDT) has introduced two new sections to encourage digital payments in the country.
CBDT included Section 269SU in the Finance Act 2019 and Section 10A in the Payments Settlement Systems Act 2007 via a notice dated 18th October 2019.
First announced by Finance Minister Nirmala Sitharaman while presenting the Union Budget 2019, the new section named ‘ 269SU’ provides that every person having business with a turnover exceeding Rs 50 crore shall mandatorily provide cashless payments facility through prescribed electronic modes.
Further, Section 10A mandates that bank or payments systems provider shall not impose any charge including MDR on a payer making a payment or the beneficiary receiving the payment through prescribed electronic modes as per Section 269SU.
For the uninitiated, merchant discount rate(MDR) is a charge levied for facilitating a digital transaction and is generally distributed among various parties.
Currently, merchants bear the cost of MDR that is around Rs 12-15 per transaction. The income tax department will prescribe the eligible electronic modes and the above two provisions will come into effect from 1st November 2019.
Additionally, the department has invited applications from banks and payment system providers who are willing to get their services notified under the new Section 269SU as the prescribed mode of payment.
Interested service providers are asked to send detailed applications including their PAN, payment system registration number and description of the electronic mode of payment proposed to be notified under Section 269SU.
The department will accept applications via email till 28th October 2019.
It seems that the government has taken the middle road while implementing these provisions. Earlier, the payment industry stakeholders had cautioned that zero charges on digital transactions will hurt the payments firms and could affect acquiring new merchants.
But the new limit of Rs 50 crore will give early-stage payment service providers and startups a headspace to grow and develop a customer base.