Will we have to pay 18% tax on payments up to ₹2000? A decision can be taken today in the GST Council meeting

The 54th meeting of the Goods and Services Tax Council (GST Council) is going to be held today and many big decisions can be taken in it. The most discussed among these is the consideration of imposing 18% GST on payment aggregators like BillDesk and CCAvenue for small online transactions up to Rs 2,000 using debit and credit cards. If this happens, then making payments using debit-credit cards can become expensive.

GST Recommended Fitment Panel
According to a report published on Business Today, there are indications that in the GST Council meeting, the GST Fitment Panel has argued that payments aggregators work as intermediaries for transactions and hence they should not be classified as banks. Meaning, the Fitment Panel is in favor of imposing GST on these PAs. Let us tell you that at present, payments aggregators have been exempted from GST on transactions of less than Rs 2,000.

80% payments are less than Rs 2000
More than 80% of the total digital payments in India are of less than Rs 2,000. According to a notification issued by the government during demonetisation in 2016, payment aggregators were prohibited from levying tax on the services provided to merchants on these transactions. Aggregators currently charge merchants a fee of 0.5% to 2% per transaction. In such a situation, if GST is applicable on these small payments, then payment aggregators can pass on this additional cost to the merchants.

Small traders will have a big impact
If there is a decision in today’s meeting of the GST Council to impose 18% tax on these small transactions of less than Rs 2000, then it can affect small traders the most, who often depend on low value transactions. Whereas, for traders engaged in large transactions, the proposed additional 18% tax on payment gateway charges may not put much financial burden.

Will UPI payments be affected?
Unified Payments Interface (UPI) is currently the most popular means of digital payment, especially for small transactions, UPI transactions have seen a tremendous 57% annual growth in FY 2024 and the transaction figure was more than Rs 131 billion. The special thing is that in the case of small transactions, it will not have any effect on those who pay through UPI. Even if GST is imposed, the additional amount will have to be paid only on payments made through debit card, credit card and net banking.