Payment Gateways Request GST Waiver on Low-Value Commissions
Payment gateway operators have urged the finance ministry to waive the 18% GST on commissions earned from processing digital transactions under ₹2,000. The proposal will be considered during the upcoming GST Council meeting on December 21, 2024. Here’s a summary of the ongoing discussions and concerns:
Why Gateways Are Opposing GST on Low-Value Transactions
1. Impact on Digital Payment Growth
Payment gateways argue that imposing GST will increase transaction costs for merchants. As a result, the added financial burden could discourage small merchants, especially in rural areas, from accepting digital payments.
2. Retrospective Taxation Risk
The proposal includes a retrospective levy from FY 2017-18, which could create a huge tax liability for aggregators. Notices have already been issued to major players like BillDesk and CCAvenue, demanding GST on past transactions.
3. Existing Exemptions
Currently, transactions below ₹2,000 conducted through UPI and RuPay debit cards are exempt from GST and merchant fees. However, GST applies only to card and net banking transactions, which make up a significant portion of gateway commissions.
Current Scenario
Payment gateways typically charge a service fee ranging from 0.5% to 2% for processing credit and debit card transactions. The Fitment Committee has classified payment aggregators as intermediaries rather than banks, recommending that GST be applied to their services.
Industry Insights
1. Burden on Small Merchants
With over 80% of digital payments in India valued at less than ₹2,000, GST on commissions could stifle small merchants and impact the adoption of digital payments.
2. Clarifications Needed
Industry experts have raised concerns about the lack of clarity regarding the classification of payment aggregators and their role in small-value transactions.
3. Government Orders Favoring UPI and RuPay
Under government mandates, UPI and RuPay debit card payments are free of transaction fees. Extending similar relief to other digital payment channels could further boost adoption.
Conclusion
The GST Council faces a critical decision: balancing revenue considerations with the need to sustain India’s digital payment revolution. A waiver on low-value commissions would not only relieve payment gateways but also encourage small merchants to embrace digital payments across the country.
Ultimately, the decision will likely influence the trajectory of India’s fintech ecosystem and the push toward a cashless economy.
