Refund Charges Collected Since Jan 1 on UPI, RuPay Transactions: Tax Dept to Banks

To encourage digital transactions and move towards a less-cash economy, the government inserted a new provision, Section 269SU, in the Finance Act, 2019. The Act requires a person carrying on business and having sales/turnover/gross receipts from business of more than Rs 50 crore in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes.

Subsequently, in December 2019, debit card powered by RuPay; Unified Payments Interface (UPI) (BHIM-UPI); and Unified Payments Interface Quick Response Code (UPI QR Code) were notified as prescribed electronic modes. “Banks are advised to immediately refund the charges collected, if any, on or after January 1, 2020, on transactions carried out using the electronic modes prescribed under section 269SU of the Income-tax Act,1961 and not to impose charges on any future transactions carried through the said prescribed modes,” the CBDT circular said.

The apex body on direct taxes said that it had in December 2019 clarified that any charge, including the Merchant Discount Rate (MDR) shall not be applicable on or after January 1, 2020, on payment made through prescribed electronic modes.

However, it has received representations that some banks are imposing and collecting charges on transactions carried out through UPI. A certain number of transactions are allowed free of charge beyond which every transaction bears a charge.