GST Council May Propose 18% Tax on Payment Aggregators

The GST Council may discuss implementing an 18% tax on payment aggregators for transactions up to ₹2,000. The GST Fitment Panel believes payment aggregators, like BillDesk and CCAvenue, act as intermediaries rather than banks, and should therefore be taxed. At its meeting on September 9, the GST Council may consider this proposal, affecting digital transactions made via debit and credit cards. 

Currently, transactions under ₹2,000 are exempt from GST, as per a 2016 notification issued during demonetisation. Over 80% of India’s digital transactions fall into this category. Recently, tax authorities began collecting taxes from the 2017-18 fiscal year, coinciding with the GST implementation. The GST Council may soon clarify the taxation rules for these transactions.

Payment aggregators typically charge merchants between 0.5% and 2% per transaction, and the proposed GST could result in additional costs for merchants. For example, a transaction of ₹1,000 currently incurs a ₹10 fee at a 1% payment gateway charge. With the GST, this would increase to ₹11.80, a modest rise that could accumulate over multiple transactions.

UPI (Unified Payments Interface), which now accounts for more than 80% of retail digital payments in India, will remain unaffected by the proposed tax. UPI transactions do not incur Merchant Discount Rates (MDR) and will continue to be free for both merchants and customers. UPI’s transaction volume grew by 57% year over year in FY2024, reaching over 131 billion transactions. Therefore, it remains the most cost-effective option for transactions under ₹2,000.

Vakilsearch is here to support businesses with expert GST solutions. From GST registration to filing returns and managing audits, our experienced team ensures accurate, hassle-free compliance with the latest GST Council mandates. Stay ahead of changing tax rules and avoid penalties with our comprehensive GST services, tailored to your business needs. Let Vakilsearch handle your GST compliance while you focus on growing your business. 

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Akash G Varadaraj

Content Writer at Vakilsearch

I'm Akash. G. Varadaraj, an official content writer at Vakilsearch with over four years of experience. I'm here to simplify complex legal concepts into easily accessible articles that even a layman can understand. As a regular contributor to this news portal, I aim to keep you informed in the dynamic world of law, compliance, taxation, and much more. I ensure that you get to know our Vakilsearch expert's take on every piece of news, how it can help, and what you should do.

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