The Goods and Services Tax (GST) Council is gearing up for its next meeting on September 9, where the imposition of an 18% GST on payment aggregators (PAs) like BillDesk and CCAvenue is likely to be a key agenda item. The proposed tax would apply to digital transactions up to Rs 2,000, processed through debit and credit cards.
According to a report by CNBC TV18, the GST Fitment Panel has voiced concerns about the classification of payment aggregators. The panel maintains that these intermediaries, which facilitate digital payments, should not be categorized as banks. This shift in classification paves the way for the proposed GST on PAs.
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GST on payment aggregators Under Tax Scrutiny
Currently, payment aggregators are exempt from paying GST on transactions below Rs 2,000. This exemption, first introduced during the demonetisation period in 2016, was aimed at encouraging digital payments for small transactions. Over 80% of digital payments in India are valued under Rs 2,000, making this tax exemption significant for merchants and consumers alike.
However, recent efforts by authorities to begin collecting taxes from FY2017-18 have brought this issue back into focus. As the GST on payment aggregators regime gains momentum, there is growing speculation that the upcoming GST Council meeting will provide further clarification on this matter.
Payment aggregators currently charge merchants a transaction fee ranging between 0.5% and 2%. If the proposed GST on payment aggregators is implemented, these costs are likely to rise, with PAs expected to pass on the burden to merchants. This could, in turn, lead to higher costs for consumers, especially for smaller transactions.
GST Exemptions and Potential Impact
The payment aggregators, who enable services such as QR codes, POS machines, and net banking, have enjoyed a tax-free status on small transactions for years. But the government’s move to tax transactions starting from FY2017-18 may disrupt the landscape of digital payments in India. The imposition of GST on payment aggregators would affect merchants and aggregators alike, with the possibility of consumers ultimately bearing the brunt of the additional cost.
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As digital transactions become a more integral part of India’s financial ecosystem, the GST Council’s decision on this issue will be closely watched by businesses and consumers. The upcoming meeting could significantly impact the way payment aggregators operate and their future role in India’s growing digital economy.
In the meantime, stakeholders are eagerly awaiting the Council’s decision, which could redefine how small digital transactions are taxed in the country.
