CBDT to banks: Don’t impose fees on digital transactions; refund charges collected from January

CBDT had on December 30, 2019, clarified that any charge including MDR should not be applicable on or after January 1, 2020, on payment through prescribed digital modes.

Central Board of Direct Taxes (CBDT) on Sunday has advised banks to refund charges collected by them on electronic transactions. “Banks are advised to immediately refund the charges collected, if any, on or after January 1, 2020, on transactions carried out using the electronic modes prescribed under section 269SU of the IT Act,” a circular by the board signed by Ankur Goyal, Under Secretary to the Government of India read. The circular also asked banks to not impose charges on any future transactions as well “carried through the said prescribed modes” such as debit card powered by RuPay, BHIM-UPI, and UPI QR Code.

According to the circular, representations have been received that some banks are imposing and collecting charges on transactions carried out through UPI. A certain number of transactions are allowed free of charge beyond which every transaction bears a charge. “Such practice on part of banks is a breach of section 10A of the Payment and Settlement Systems (PSS) Act as well as section 269SU of the IT Act. Such breach attracts penal provisions under section 271DB of the IT Act as well as section 26 of the PSS Act 2007,” Goyal said in the circular.

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The IT Act provided businesses with a turnover of over Rs 50 crore in the immediately preceding year shall “mandatorily provide facilities for accepting payments through electronic modes”. The government later had also inserted a new provision called section 10A in the PSS Act according to which banks should not impose any charge on a payer making a payment or a beneficiary receiving payment through electronic modes prescribed under Section 269SU of IT Act. The board had on December 30, 2019, clarified that based on section 10A of the PSS Act any charge including merchant discount rate (MDR) should not be applicable on or after January 1, 2020, on payment through prescribed digital modes. Multiple banks charge Rs 2.5 for UPI transactions up to Rs 1,000 and Rs 5 for transactions above Rs 1,000 excluding GST.