CBDT to fine businesses ₹ 5,000/day for not using digital payment facilities

CBDT to fine businesses ₹ 5,000/day for not using digital payment facilities

The move is to encourage digital transactions and a ‘less-cash’ economy in India, Indian government has been inserted a New Section – 269SU in the Income Tax Act, 1961 as a part of the Finance Act, 2019, which states “Acceptance of payment through prescribed electronic modes”, which makes it mandatory for :-

“Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds ₹ 50 Crores    (Rupees Fifty Crore) during the immediately preceding previous year”

Further Finance Act 2019 has inserted a New Section – 271DB in the Income Tax Act, 1961 which states that,

“If a person who is required to provide facility for accepting payment through the prescribed electronic modes of payment referred to in section 269SU, fails to provide such facility, he shall be liable to pay, by way of penalty, a sum of  ₹ 5000 (Rupees Five Thousand), for every day during which such failure continues.”

Further CBDT has inserted Rule 119AA via Notification No.105/2019 dated December 30, 2019, applicable from January 01, 2020, which states that,

“Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds ₹ 50 Crore (Rupees Fifty Crore) during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:-

(i) Debit Card powered by RuPay;

(ii) Unified Payments Interface (UPI) (BHIM-UPI); and

(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)”

CBDT issued circular No. 32/2019 dated December 30, 2019, which states that, in order to allow sufficient time to specified person to install and operationalise the facility for accepting payments through specified electronic modes, it is hereby clarified that the penalty under section 271DB of the act shall not be levied if the specified person installs and operationalises the facilities on or before January 30, 2020. However, if the specified person fails to do so, he shall be liable to pay penalty of ₹ 5000 (Rupees Five thousand) per day from February 01, 2020 under section 271DB of the act for such failure.

As per the Section 10A of the Payment and Settlement Systems Act 2007, inserted by the Finance Act, no bank or system provider is allowed to impose any charge on a payer making payment, or a beneficiary receiving payment, through prescribed electronic modes. No charge including the Merchant Discount Rate (MDR) will be applicable on or after January 01, 2020 on payment made through prescribed electronic modes.

Conclusion:

The above specified persons are required to install and operationalise facilities for digital payment on or before January 31, 2020, However, if the specified person fails to do so, he shall be liable to pay a penalty of ₹ 5,000 per day during which such failure continues from February 01, 2020, under section 271DB of the Income Tax Act for such failure.