BillDesk and CCAvenue Receive GST Notices for Digital Transactions Under Rs 2,000

Payments Firms Face GST Scrutiny

Major payment aggregators, including BillDesk and CCAvenue, have recently been served notices by the Goods and Services Tax (GST) authorities. The notices demand that these firms pay GST on fees charged to merchants for processing digital transactions under Rs 2,000, as reported by The Economic Times.

Vishwas Patel, Joint Managing Director of Infibeam Avenues, which operates CCAvenue, confirmed receipt of the show-cause-cum-demand notice. Patel stated, “Our teams have responded to the notice.” The scrutiny comes as a significant portion of digital payments in India, over 80%, are valued at less than Rs 2,000.

Background on Tax Exemption

Historically, payment aggregators such as BillDesk and CCAvenue have not applied GST to the fees for processing these small transactions. This practice followed a government notification issued during the 2016 demonetisation period. However, the GST authorities are now seeking retroactive tax collection dating back to fiscal year 2017-18, when the GST regime was first implemented.

This situation specifically affects transactions made via debit cards, credit cards, and net banking. Notably, transactions through Unified Payments Interface (UPI) and RuPay debit cards are exempt from merchant discount rates or transaction fees, according to government orders.

Industry Response and Future Outlook

The Payments Council of India, chaired by Vishwas Patel, has reached out to the finance ministry and other relevant authorities to address the issue. Patel remains hopeful that the GST Council and the finance minister will resolve the matter, considering the payments industry’s crucial role in the government’s Digital India initiative.

Patel emphasized the importance of supporting MSMEs (Micro, Small, and Medium Enterprises) in India, noting that the industry has facilitated widespread digital payment acceptance. He advocates for the continued use of UPI payments at no cost to further advance the government’s digitisation efforts.

Potential Policy Changes

The upcoming GST Council meeting is expected to clarify the taxation rules for small digital transactions. This clarification could significantly impact how payment aggregators handle GST on transaction fees moving forward.