This Tax Alert explains Notification No. 105/2019
(Notification) and Circular No. 32/2019 (Circular) both dated 30 December 2019
issued by the Government of India (GOI), through the Central Board of Direct
Taxes[1] (CBDT) prescribing electronic modes of payment under the
newly inserted Section (S.) 269SU of the Income Tax Act (ITA), which came into
effect from 1 November 2019[2]. .
The Notification notifies three electronic modes of
payments viz.
(i) Debit Card powered by RuPay[3]
(ii) Unified
Payments Interface (UPI) (BHIM[4] -UPI) and
(iii) Unified Payments
Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)
as mandatory
modes of electronic payments with effect from 1 January 2020 for every person
carrying on business if his total sales, turnover or gross receipts in business
(turnover) exceeds INR500m during the immediately preceding tax year (specified
person). These modes are in addition to any other electronic modes being
provided by such person.
The Circular clarifies that, from 1 January 2020, the
specified person must provide the facilities for accepting payment through the
above referred prescribed electronic modes. Further, in view of a new provision
in the Payment and Settlement Systems Act, 2007 (PSSA), any charge including
the Merchant Discount Rate (MDR) shall not be applicable on or after 1 January
2020 on payment made through above referred prescribed electronic modes.
The Circular also clarifies that a penalty of INR5,000
per day is applicable in case of failure by specified person to comply with
S.269SU. However, in order to allow sufficient time to the specified person to
install and operationalize the facility for accepting payments through
prescribed electronic modes, no penalty shall be levied if the specified person
installs and operationalizes the facilities on or before 31 January 2020.
However, if the specified person fails to do so, he shall be liable to pay a
penalty of INR5,000 per day from 1 February 2020 for such failure.
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