Bank instructed to refund the charges received on or after 01.01.2020 for compliance to section 269SU: A welcome move by CBDT

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Bank instructed to refund the charges received on or after 01.01.2020 for compliance to section 269SU: A welcome move by CBDT

CBDT is acting fast. It has already clarified that the Bank /service provider cannot impose any charges on transactions made through Debit Card, BHIM UPI & BHIM UPI QR CODE on or after 1st  January 2020.

It has now asked the bank, service provider etc that if any such charges are recovered then it be refunded  immediately.

The copy of two relevant circular is produced hereunder:

F.No.370142/35/2019-TPL-Pt
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

Circular No. 16/2020

Dated: 30th August, 2020

Subject: Imposition of charge on the prescribed electronic modes under section 269SU of the Income-tax Act, 1961 – reg.

In furtherance to the declared policy objective of the Government to encourage digital transactions and move towards a less- cash economy, the Finance (No. 2) Act 2019 inserted a new provision namely section 269SU in the Income-tax Act, 1961 (“the IT Act”), which provides that every person having a business turnover of more than Rs. 50 crores during the immediately preceding previous year shall mandatorily provide facilities for accepting payments through prescribed electronic modes. Further, a new provision namely section 10A was also inserted in the Payment and Settlement Systems Act 2007 (“the PSS Act”), which provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under section 269SU of their IT Act. Subsequently vide notification no. 105/2019 dated 30 12.2019 (i) Debit Card powered by RuPay: (ii) Unified Payments Interface (UPI) (BHIM-UPI); and (iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code) were notified as prescribed electronic modes under section 269SU of the IT Act.

  1. A circular no. 32/2019 dated 30.12.2019 was issued by the Board to clarify that based on section 10A of the PSS Act, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01st January, 2020 on payment made through prescribed electronic modes. However, representations have been received that some banks are imposing and collecting charges on transactions carried out through 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 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.
  2. Banks are, therefore, advised to immediately refund the charges collected, if any, on or after 1st  January 2020 on transactions carried out using the electronic modes prescribed under section 269SU of the IT Act and not to impose charges on any future transactions carried through the said prescribed modes.

Ankur Goyal

Under Secretary to the Govt. of India

Section 269SU governs ‘Acceptance of payment through prescribed modes’ by person having total sales, turnover, total gross receipts of more than Rs. 50 Crore.

CBDT vide Notification 105/2019 and Circular 32/2019 dated 30.12.2019 has prescribed 3 Electronic Modes from 1st January, 2020 (Rule 119AA) for accepting payment as mentioned in only.  As under:

  1. a) Debit Card powered by Rupay
  2. b) Unified Payments Interface (UPI) – BHIM-UPI
  3. c) UPI QR Code

Penalty for non-compliance – Rs. 5,000/day

It may be noted that no penalty under Section 271DB, if the person installs and operationalise the facilities on or before 31st January, 2020. The copy of the said circular is as under:

Circular No. 32/2019

Government of India
Ministry of Finance
Department of Revenue
Tax Policy Division
Central Board Of Direct Taxes
New Delhi

Dated: December 30, 2019

Sub.: Clarifications in respect of prescribed electronic modes under section 269SU of the Income-tax Act, 1961 – reg.

In furtherance to the declared policy objective of the Government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961 (“the Act”), vide the Finance (No. 2) Act 2019 (“the Finance Act”), which provides that every person having a business turnover of more than Rs. 50 Crore (“specified person”) shall mandatorily provide facilities for accepting payments through prescribed electronic modes. The said electronic modes have been prescribed vide notification no. 105/2019 dated 30.12.2019 (“prescribed electronic modes”). Therefore, with effect from 01st January, 2020, the specified person must provide the facilities for accepting payment through the prescribed electronic modes. Further. Section 10A of the Payment and Settlement Systems Act 2007, inserted by the Finance Act, provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Act. Consequently, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01st January, 2020 on payment made through prescribed electronic modes.

  1. In this connection, it may be noted that the Finance Act has also inserted section 271DB in the Act, which provides for levy of penalty of five thousand rupees per day in case of failure by the specified person to comply with the provisions of section 269SU. In order to allow sufficient time to the specified person to install and operationalise the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271DB of the Act shall not be levied if the specified person installs and operationalises 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 01st February, 2020 under section 271DB of the Act for such failure.

[F.No.370142/35/2019-TPL]

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