Indian Businesses Will Be Fined If They Don't Offer Digital Payment Facility
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Following demonetization, the use of digital payment services has been on the rise. The central government has been pushing to make India a cash-lite economy. In a step further, the government has notified that businesses with turnover of INR 50 crore and more will have to pay a fine of INR 5,000 per day if they do not offer online payment facilities to customers.
According to a notification from the Central Board of Direct Taxes (CBDT), “Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely: (i) Debit Card powered by RuPay; (ii) Unified Payments Interface (UPI) (BHIM-UPI); and (iii) Unified Payments Interface Quick Response Code.”
Govt’s Push For Digital Transactions
The proposal for mandating businesses over INR 50 crore to offer digital transaction services was introduced by the finance minister Nirmala Sitharaman during the Union Budget in July 2019. Thus the provision of Section 269SU was introduced.
Following this, the Finance Act was amended to include Section 271 DB to levy fees on the business if they fail to comply with the mandate. “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 31 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 1 February, 2020 under section 271 DB of the Act for such failure,” the circular noted.
Apart from this, the Section 10A of the Payment and Settlement Systems Act 2007, inserted by the Finance Act states that no bank or system provider can impose charges for making online payment, or on a beneficiary receiving payment. The CBDT circular reiterated the mandate and said that any charge including the MDR (Merchant Discount Rate) will not be applicable from January 01, 2020.
India’s Online Payments Industry
According to a November 2019 report by Research And Markets, the Indian mobile payment industry is expected to record a CAGR of 22 per cent to reach $1,259,449.2 million by 2025. The mobile wallet payment segment in value terms increased at a CAGR of 21.8 per cent during 2018-2025.
A report by Google and Boston Consulting Group (BCG) revealed that the Indian digital payments industry is estimated to touch $500 billion by 2020, contributing 15 per cent to the country’s GDP.