Ahead of the GST Council meeting on December 21, payment gateway operators have submitted representations to the finance ministry opposing the proposed 18% GST on commissions earned on digital payments below ₹2,000. Operators argue that the levy could hinder the growth of digital transactions, especially in smaller towns and rural areas, by shifting the financial burden to merchants.
Currently, payment aggregators charge fees ranging from 0.5% to 2% for processing credit and debit card payments. They are exempt from GST on transactions under ₹2,000, but the Fitment Committee views these firms as intermediaries rather than banks, warranting the proposed tax.
"We’ve met with the revenue secretary to explain that imposing GST would severely impact small-value transactions, which constitute over 80% of digital payments in India," said a payment industry official. Concerns also arise from the possibility of the GST being applied retrospectively, potentially leading to significant tax liabilities for operators.
Large aggregators such as BillDesk and CCAvenue have already faced tax notices demanding GST on fees for processing transactions dating back to 2017-18. The issue primarily pertains to card and net banking transactions, as UPI and RuPay debit card payments remain exempt from merchant discount rates and associated fees under government directives.
Industry leaders are hopeful that the GST Council will prioritize the long-term growth of digital payments. “A GST levy on these commissions will discourage merchants and consumers alike, slowing down digital adoption,” an industry expert said.
The Council's decision is likely to have far-reaching implications for India’s digital economy, especially in fostering financial inclusion through micro-transactions.
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