CBDT Exempts B2B Ecommerce From Mandatory UPI, RuPay Support

The Central Board of Direct Taxes (CBDT), on May 20 (Wednesday), has exempted all companies engaged in B2B transactions from enabling digital payments facilities such as RuPay, unified payments interface (UPI) or UPI QR code support temporarily.

In the new circular dated May 20, CBDT said, “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 the aggregate of all amounts received during the previous year, including the amount received for sales, turnover or gross receipts, are by any other mode than cash.”

Section 269SU, in the Income Tax Act of 1961, added in December 2019, mandated electronic mode of payments such as debit card powered by RuPay, UPI or UPI QR code for all businesses with INR 50 Cr sales/turnover/gross receipts in the immediately preceding previous year. This included tech startups in the B2B ecommerce segment as well as consumer-facing companies such as Amazon, Flipkart and other smaller vertical ecommerce players.

In the 2019-20 budget speech, Indian Finance Minister Nirmala Sitharaman had proposed that businesses with annual turnover more than INR 50 Cr should offer low-cost digital modes of payment to their customers, and no charges or merchant discount rate (MDR) would be imposed on customers as well as the merchants. This includes low-cost digital modes of payment such as Aadhaar Pay, NEFT, Debit Cards, and RTGS to their customers as well. The rules stipulated that violation of the provision will cost businesses INR 5K per day from February 1, 2020.

According to a Hindu BusinessLine report, several businesses had also met CBDT to highlight that mandatory digital payment facilities should generally be applicable in B2C businesses that directly deal with consumers. The group had also highlighted that the prescribed electronic modes had a maximum payments limit per transaction or per day, which made them less relevant for the B2B ecommerce sector where the value of transactions is higher. B2B ecommerce companies rely on other National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) as their primary payment modes.

Considering the economic impact of the Covid-19 pandemic and the toll on revenue, B2B ecommerce companies would welcome the government’s decision to change the rules. It would allow startups to save costs on gateway charges that they have to incur to support UPI and RuPay payments and remittances.