In a significant move for the financial sector, Finance Minister Nirmala Sitharaman announced an important decision during the 55th GST Council Meeting held in Jaisalmer.
The decision brings relief to payment aggregators, exempting those processing transactions under ₹2,000 from Goods and Services Tax (GST). This decision aims to ease the financial burden on smaller entities in the digital payment ecosystem.
Payment aggregators, which play a key role in facilitating online transactions by pooling funds from customers and transferring them to merchants, will benefit from this exemption.
However, it is important to note that this relief does not extend to payment gateways or fintech services. Payment gateways and fintech companies offer more extensive technological platforms and services for digital transactions, and they will continue to be subject to GST.
Sitharaman’s announcement comes at a time when the digital payment sector continues to expand rapidly, with more and more consumers turning to online payments. Payment aggregators, by providing an essential service, have become crucial in ensuring the smooth processing of these transactions.
The move is expected to further promote the growth of smaller payment aggregator businesses by reducing their tax burden.
In addition to this, the Finance Minister addressed another significant issue: the imposition of GST on penal charges by banks and Non-Banking Financial Companies (NBFCs).
It was clarified that no GST will be levied on penal charges imposed by these financial institutions. Penal charges typically arise when borrowers fail to comply with the terms of their loans, such as missing an EMI (Equated Monthly Instalment) or breaching a repayment schedule.
This exemption provides relief to borrowers, as it prevents an additional tax burden on fees already incurred due to non-compliance with loan conditions.
However, there was also an important matter on the agenda of the 55th GST Council Meeting that did not see any immediate resolution. The GST rates on health and life insurance premiums were under discussion, with a recommendation for a possible reduction.
The matter had been examined by a Group of Ministers (GoM), but differing opinions within the group led to a delay in making a final decision.
Bihar Deputy Chief Minister Samrat Chowdhary confirmed that while there had been a thorough discussion on reducing GST for these premiums, more deliberations are needed. As a result, the GoM has decided to hold another meeting in January to continue the discussions and attempt to reach a consensus.
While the debate on reducing GST on health and life insurance premiums continues, the delay highlights the complexity of tax policy decisions and the importance of ensuring that all stakeholders are heard before making any changes.
The GST Council’s decision to defer the matter until the new year indicates the need for a more comprehensive approach to balancing the interests of insurance providers, policyholders, and the government.
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