The Finance (No. 2) Act, 2019 introduced a new provision Section 269SU and subsequently notified Rule 119AA prescribing the modes of acceptance of payment. The government has prescribed certain modes of payment for any assessee whose total turnover or gross receipts from business exceed Rs 50 crore during the immediately preceding previous year.

The introduction of section 269SU is part of the government’s initiative for the promotion of digital payments and a cash less economy. The government is promoting low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain debit cards, NEFT, RTGS etc., to promote a cashless economy. Hence, the government has introduced section 269SU mandating business establishments with an annual turnover of more than Rs 50 crore to offer certain low-cost digital modes of payment to their customers.

Where an assessee who is covered by the provisions of section 269SU fails to provide the facility of payment under the prescribed modes, such assessee would be liable for a penalty of Rs 5,000 for every day w.e.f. from 1 February 2020.

Since the prescribed electronic modes have a maximum payment limit per transaction or per day, it was 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 mode would cause administrative inconvenience and impose additional costs without any benefits. Therefore representations were made to the board in this regards

The Board while addressing this hardship issued the circular no. 12/2020 stating, “the provisions of section 269SU of the Income Tax Act shall not apply to a specified person having only B2B transactions i.e. no transaction with the retail customer if at least 95% of the aggregate of all amounts received during the previous year, including the amount received for sales, turnover or gross receipts, or by any mode other than cash.

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