As per a circular issued Sunday, the Central Board of Direct Taxes (CBDT) has asked banks to return any charges levied on Unified Payment Interface (UPI) transactions from January 1, 2020 to customers and merchants. The banks have been asked to discontinue all such levies on electronic modes of payment particularly determined by the centre for promoting digital payments and cashless economy or face ''penal action''.
"Banks are... advised to immediately refund the charges collected, if any, on or after January 1, 2020, on transactions carried out using the electronic modes... and not to impose charges on any future transactions carried through the said prescribed modes," the circular said. "There have been some representations that some banks are imposing and collecting charges on transactions carried out through UPI... Such a practice on part of the banks is a breach of Section 10A of Payments and Settlements Systems Act ... Such breach attracts penal provisions under Section 271 DS of the IT Act as well as Section 26 of the PSS Act."
It has come to the notice of the direct tax policymaking authority that several banks have begun to charge fee on UPI transactions. Some are allowing a fixed number of transactions for free and after they have been exceeded, charges are levied, which CBDT said was a violation of the law.
The practice goes against the Income tax Act as well which says that any person who has an obligation to offer electronic payments facility via specified modes but fails to do so has to pay a penalty amount to the tune of Rs. 5000 on a daily basis for the period of such default.
The government during the last year made amendments to the Act and required enterprises with sales of over Rs. 50 crore to mandatorily offer electronic payments modes. Also, modifications were effected to the PSS Act to stop imposing charges on any person receiving or making payments via digital modes specified under the Act.