Before providing details of relaxation specified in the circular of CBDT No. 12/2020 dated 20th May, 2020
We should discuss about the newely section 269SU which talks about payment acceptance through the electronic modes.
As an initiative of the government to boost and promote the digital transaction and cashless economy, the Government of India has introduced a new provision namely Section 269SU Prescribed Electronic Mode and subsequently notified Rule 119AA through the Finance (No. 2) Act, 2019 that prescribes certain electronic modes of payments as a mandatory facility provided by every person to their customers
This section requires every person carrying on business (NOT TALKS ABOUT PROFESSION) and having sales/turnover/gross receipts from business of more than Rs 50 Crores (“specified person”) in the immediately preceding previous year to mandatory provide facilities for accepting payments to the customers through prescribed electronic modes.
As mentioned in the para, persons carrying out ‘profession’ have been kept away from the ambit of this newly inserted provisions.
Subsequently vide notification no. 105/2019 dated 30.12.2019 The Central Board of Direct Taxes (CBDT) has notified the prescribed modes of payment for the purpose of section 269SU:
(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) were notified as prescribed electronic modes.
Applicability of section
Section 269 SU became notified on 1st November, 2019 but rule of electronic modes of payment has been notified on 30th December, 2019. Hence, the section becomes applicable from 1st January, 2020
Amendment to the Payment and Settlement Systems Act, 2007
A new section 10A is added in the Payment and Settlement Systems Act, 2007 to provide for waiving the charges on the digital payments for both the payer and the receiver.
Penalty for Non- Compliance
In a case where a person to whom the provisions of section 269SU are applicable or who comes in the ambit of the provisions of section 269SU fails to provide the facility of payment under the prescribed modes, such person would be liable for a penalty u/s 271DB of Rs 5,000 for every day during which the failure or non-availability of the facility.
The penalty under section 271DB of the Act will not be applicable to the concerned person to install electronic modes of payment at his business venture until 31st Jan 2020 for giving him enough time to install the same
The Joint Commissioner of Income Tax authority vested the power to impose the penalty on such a person by ordinary issuing of a show-cause notice to prove why penalty should not be imposed for non-compliance. Also, the Joint Commissioner may not impose a penalty if the person defaulting with the provisions of section 269SU proves that there were good and sufficient reasons for such failure.
Now, comes to the clarifications provided by CBDT in respect of prescribed electronic modes under section 269SU of the Income-tax Act, 1961
1. In furtherance to the declared policy objective of the Government to encourage digital transactions and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961 (“the Act”), vide the Finance (No.2) Act 2019. This section requires every person carrying on business and having sales/turnover/gross receipts from business of more than Rs 50 Crores (“specified person”) in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes.
Subsequently vide notification no. 105/2019 dated 30.12.20 19
(i) Debit Card powered by RuPay;
(ii) Unified Payments Interface (UPI) (BH IM-UPI); and (iii) Unifi ed Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code) were notified as prescribed electronic modes
2. Representations have been received stating that the above requirement of mandatory facility for payments through the prescribed electronic modes is generally applicable in B2C (Business to Consumer) businesses, which directly deal with retail customers. Moreover, since the prescribed electronic modes have a maximum payment limit per transaction or per day they are not so relevant to B2B (Business to Business) businesses, which generally receive large payments through other electronic modes of payment such as NEFT or RTGS. Mandating such businesses to provide the facility for accepting payments through prescribed electronic modes would cause administrative inconvenience and impose additional costs.
3. In view of the above, it is hereby clarified that the provisions of section 269SU of the Act shall not be applicable to a specified person having only B2B transaction s (i.e. no transaction with retail customer/consumer) if at least 95% of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by any mode other than cash.
Conclusion from the above clarification
Specified person carried out B2B transaction accepting payment by any mode other than cash less than 95 % is required to be complied the above provision. Hence, it is provided the relaxation to specified person carried out more than 95 % B2B transaction category by any mode other than cash