18% GST ON SMALL TRANSACTIONS UPTO RS. 2000
The Goods and Services Tax (GST) Council may consider imposing an 18% tax on payment aggregators for small transactions up to Rs 2,000. This is according to sources familiar with the matter.
Currently, payment aggregators are not taxed on transactions below Rs 2,000. The government is considering this move as a way to increase revenue.
The GST Council is considering a proposal to impose an 18% GST on payment aggregators for digital transactions up to ₹2,000, including payments made via debit and credit cards. This change would affect small transactions, which currently benefit from a tax exemption introduced during the 2016 demonetization. Payment aggregators like BillDesk and CCAvenue may pass this additional cost to merchants, potentially increasing transaction fees for businesses, especially small ones.
Here are some of the potential implications of this move:
- Consumers may see a slight increase in the cost of small transactions.
- Payment aggregators may see a decrease in their profits.
- The government may see an increase in revenue.
Unified Payments Interface (UPI) is currently the most popular form of digital payment, particularly for small-value transactions, which has resulted in a limited overall impact on digital transactions. In the fiscal year 2024, UPI experienced a remarkable 57% Year over Year (YoY) growth in transaction volume, exceeding 131 billion transactions.
Consequently, for transactions under Rs 2,000, UPI continues to be a cost-free option for both merchants and customers, making it a highly appealing payment method.
The proposal is under review for the upcoming GST Council meeting, and it’s expected that this could impact businesses that rely heavily on small-value digital transactions
Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.
