CBDT exempts some B2B transactions from deploying certain e-payment facilities

Shishir Sinha New Delhi | Updated on May 20, 2020

Non-retail Rs 50 crore plus businesses are not required to provide RuPay, UPI-based payment facility, says CBDT

The Central Board of Direct Taxes (CBDT) has exempted businesses not dealing with retail customers from deploying certain e-payment facilities using debit cards powered by RuPay, Unified Payments Interface (UPI) and Unified Payments Interface Quick Response Code (UPI QR Code).

“It is hereby clarified that the provisions of Section 269SU of the Act shall not be applicable to a specified person having only B2B transaction s (i.e., no transaction with retail customer/consumer) if at least 95 per cent of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by any other mode than cash,” CBDT mentioned in a circular dated May 20.

Finance Minister Nirmala Sitharaman, in her 2019-20 budget speech, proposed that business establishments with annual turnover more than ₹50 crore should offer low-cost digital modes of payment to their customers, and no charges or MDR shall be imposed on customers as well as the merchants.

The Reserve Bank of India (RBI) and banks will absorb these costs from the savings that will accrue to them on account of handling less cash, as people move to these digital modes of payment.

MDR is a charge levied for facilitating a digital transaction and is generally distributed among various parties.

Accordingly, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961.

This section requires every person carrying on a business and having sales/turnover/gross receipts from business of more than ₹50 crore in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes such as debit card powered by RuPay, UPI or UPI QR code. Violation of these will cost ₹5,000 per day from February 1, 2020.

‘Administrative inconvenience’

Many businesses represented to tax body saying that such mandatory facilities generally applicable in B2C (Business to Consumer) businesses, which directly deal with retail customers.

Moreover, since the prescribed electronic modes have a maximum payment limit per-transaction or per-day, they are not so relevant to B2B (Business to Business) businesses, which generally receive large payments through other electronic modes of payment such as NEFT or RTGS. “Mandating such businesses to provide the facility for accepting payments through prescribed electronic modes would cause administrative inconvenience and impose additional costs,” one of such representation said.

Shailesh Kumar, Director at Nangia Andersen, said that since non-installation of such payment facility attracted significant penalty of ₹5,000 per day, many businesses were in doubt and were forced to install such payment facilities, even though such facilities were never supposed to be used for such businesses, considering the nature of business or customer base.

“This is another instance, that shows Govt is responsive to needs and concerns of taxpayers as well as flexible to amend rules to remove genuine hardships of taxpayers,” he said.

Published on May 20, 2020

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