The Goods and Services Tax (GST) Council is set to consider imposing an 18% GST on payment aggregators (PAs) handling small digital transactions of up to Rs 2,000, including those made via debit and credit cards, CNBC-TV18 reported. The proposal will be discussed at the GST Council's forthcoming meeting on September 9.
Payment aggregators, which facilitate online payments for businesses, may face this new tax as the GST fitment committee, consisting of revenue officials from both the central and state governments, views PAs as intermediaries in card transactions, unlike banks, and believes they should be taxed accordingly.
The final decision will be made during the GST Council’s 54th meeting, chaired by Finance Minister Nirmala Sitharaman.
Sources indicate that small businesses reliant on numerous low-value transactions could be adversely affected if the GST Council approves the proposal, as payment gateways are expected to pass the additional costs onto merchants and small business owners.
Currently, payment aggregators charge merchants a fee ranging from 0.5% to 2% per transaction. The imposition of GST could lead to increased costs for merchants.
At present, payment aggregators are exempt from GST on transactions under Rs 2,000, having previously been exempt from service tax on such transactions since 2016, following the demonetisation of Rs 500 and Rs 1,000 notes.
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