Why Payment Gateways Want GST Waivers on Low-Value Commissions
Ahead of the upcoming GST Council meeting on December 21, payment gateway operators are seeking a waiver on the 18% GST levied on commissions for digital payments up to ₹2,000. This request stems from the potential negative impact on digital payment growth, particularly affecting merchants who process small-value transactions.
Impact of 18% GST on Small-Value Transactions
Currently, payment gateways charge merchants a fee of 0.5% to 2% on debit and credit card transactions. If the GST levy is implemented, these platforms will pass the tax burden onto merchants, making it costly for small businesses to handle digital payments.
According to Vishwas Patel, Joint Managing Director at Infibeam Avenues, imposing GST on low-value transactions could hinder digital payment adoption, especially in rural and underserved regions.
The Fitment Committee’s Stance
The GST Fitment Committee views payment aggregators as intermediaries rather than banks, making them liable for GST on their fees. While transactions under ₹2,000 via UPI and RuPay debit cards are exempt, debit and credit card payments processed by gateways still attract GST.
Potential Retrospective GST Liability
Tax authorities have issued notices to major aggregators like BillDesk and CCAvenue, seeking GST payments dating back to FY 2017-18, when the GST regime began. If enforced retrospectively, payment gateways may face significant financial liabilities, threatening their operations.
Key Data Points
- 80% of digital payments in India are for amounts below ₹2,000.
- Payment gateway fees typically range between 0.5% to 2%.
- GST on these commissions would be 18%.
Case Law and Precedents
The GST Council’s decision could be influenced by existing classifications and exemptions for banking services under the GST Act. Courts have previously differentiated between financial services provided by banks and intermediaries.
Implications for Digital India
Implementing GST on low-value commissions contradicts India’s push for a “Digital India” and financial inclusion. Payment gateways play a crucial role in facilitating digital transactions for small businesses and consumers across the country.
What’s Next?
All eyes are on the December 21 GST Council meeting. A waiver could support digital growth, while a levy might stifle small-value digital transactions. Payment gateways and small merchants await a decision that balances revenue collection with digital economy growth.