The GST council’s fitment committee is reportedly considering the tax rates to be imposed on PAs
The Goods and Services (GST) Council is likely to move a proposal to impose an 18 per cent GST on payment aggregators (PAs) for small value digital transactions of up to Rs 2,000 via debit and credit cards in its upcoming meeting on September 9. Payment Aggregator is a third-party service provider that enables customers to make and businesses to accept payments online.
The fitment committee, comprising revenue officials from centre and states, is mulling over the tax rate. The committee reportedly feels that PAs function as facilitators for card transactions. Considering that they are not banks, the committee is pushing to levy GST on them. The final decision will be made by the GST council chaired by the union finance minister in its 54th meeting next week.
"If this tax is imposed, it will hurt small businesses, which generally have low-value transactions...Payment gateways will just pass it on to the merchants and businesses,” CNBC reported citing a top notch financial executive.
Currently, PAs charge a payment gateway fee ranging between 0.5 per cent and 2 per cent for each transaction. If GST is levied reportedly, it is most likely that PAs will shift their tax burden on to merchants.
Presently, payment aggregators are excluded from GST on transactions below Rs 2,000. PAs take care of digital payments such as QR scanning, point of sale (POS) machines, and net banking.
Previously, in 2016, when the government demonetized Rs 500 and Rs 1,000 notes, they dropped the service tax that was applied to card payments under Rs 2,000 to boost digital financial transactions and make a gradual transition from cash to a cashless economy.