Payment Firms BillDesk and CCAvenue Handed GST Bills for Transactions Under INR 2,000

Nitin Konde, Apoorva Bajj

Sep 10, 2024 — 2 min read

Payment Firms BillDesk and CCAvenue Handed GST Bills for Transactions Under INR 2,000

According to media reports, the goods and services tax authorities have warned large payment aggregators like BillDesk and CCAvenue, requesting GST on the cost they charged merchants for processing digital transactions under INR 2,000.

Vishwas Patel, the joint managing director of Infibeam Avenues, which runs the payments processor CCAvenue, confirmed to the media that the company had indeed received a show-cause-cum-demand letter. He assured them that their teams had addressed the notification.

The value of digital payments in India is less than INR 2,000 in over 80% of cases. In response to a government notice given after demonetization in 2016, payment aggregators have not been collecting taxes from merchants for the services they rendered during these transactions.

Since the implementation of the GST regime in fiscal 2017–18, the government has been actively pursuing tax revenue. Additionally, this is happening right before the GST Council meeting next week, when rumors are circulating that they will issue a clarification on how to tax these types of transactions.

Massive Undertaking

The message has already reached some of the participants. According to the CEO of another payments company, "we are anticipating notices too" because, by government regulations, no one in the business charged merchants or paid GST on digital payments under INR 2,000.

Although the precise amount of GST being asked could not be determined by media reports, the CEO of a payments firm estimated that enterprises processing billions of dollars worth of transactions annually could face tax claims totalling several hundred crore rupees for all these years.

Pine Labs, Paytm, Razorpay, Cashfree, BillDesk, and CCAvenue are some of the bigger names in the payments business.

According to sources within the sector, merchants usually have the tax component collected from them when they pay their fees. According to their reasoning, the government would have to recoup the GST from the businesses that receive the payments if it demands it from payment processors.

The Issue Only With Debit Cards, Credit Cards, and Net Banking

The problem solely applies to online banking, debit, and credit transactions. As per official directives, the government has eliminated the merchant discount rate and transaction cost for RuPay and the Unified Payments Interface (UPI).

According to sources within the industry, to comply with a government notification from December 8, 2016, the aggregators, who offer payment solutions for both online and retail merchants, did not charge GST.

During demonetization, a notice was issued regarding services provided by acquiring banks to individuals regarding the settlement of amounts up to two thousand rupees in a single transaction using various payment card services (not including charge cards, credit cards, or debit cards).