New Delhi: Last week, the Union Cabinet gave its nod to promotional incentives for RuPay debit cards and low-value BHIM-UPI transactions (person-to-merchant) for a period of one year from April 2022. The incentive scheme has a financial outlay of Rs 2,600 crore.
Under the scheme, acquiring banks will be provided financial incentive for the promotion of Point-of-Sale (PoS) and e-commerce transactions using RuPay Debit Cards and low-value BHIM-UPI transactions for the current financial year.
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The Finance Ministry has clarified that incentives paid by the government to banks for the purpose of promotion of RuPay debit cards and low-value BHIM-UPI transactions will not attract GST. In a circular to chief commissioners of GST, the Ministry noted the incentive is in the nature of a subsidy directly linked to the price of the service and does not form part of the taxable value of the transaction in view of the provisions of the Central GST Act, 2017.
“As recommended by the Council, it is hereby clarified that incentives paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are in the nature of subsidy and thus not taxable,” it said.
Under the recently approved incentive scheme, the Centre gives banks an incentive as a percentage of the value of RuPay Debit card transactions and low-value BHIM-UPI transactions up to Rs 2,000. The Payments and Settlements Systems Act, 2007 bars lenders and system providers from charging any amount from a person making or receiving payments through RuPay Debit cards or BHIM.
RuPay debit card, low-value UPI transactions’ promotion
The latest move by the Centre to incentivise the use of RuPay cards and UPI is in continuation of its efforts to support for digital payments. Finance Minister Nirmala Sitharaman, in her speech on the Budget for FY2022-23, announced the government’s intent to continue the financial support for digital payments announced in the previous Budget.
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In FY22, the Centre had approved an incentive scheme in compliance with the budget announcement of FY2021-22 to give a further boost to digital transactions. As a result, total digital payments transactions have registered a year-on-year growth of 59 per cent, rising from 5,554 crore in FY2020-21 to 8,840 crore in FY2021-22.
UPI transactions have registered a year-on-year growth of 106 per cent, rising from 2,233 crore in FY2020-21 to 4,597 crore in FY2021-22. In December alone, UPI achieved a record of 782.9 crore digital payment transactions with a value of Rs 12.82 lakh crore.
