According to reports, the government has directed banks and payment system providers (PSPs) not to charge any merchant discount rate (MDR) on digital payments to companies with a turnover more than Rs.50 crore. The provision will be effective from 1 November 2019.
MDR is the rate charged by banks and PSPs for accepting payments from the customer through debit/credit card transactions. The fee is required to be paid by the merchant.
Earlier in the Budget speech, Finance Minister Nirmala Sitharaman had said that establishments and companies with a turnover above Rs.50 crore should consider bringing down the cost of digital payments to their customers. The FM also added that the transaction costs on such payments should be borne by the Reserve Bank of India (RBI).
Post the speech, the Central Board of Direct Taxes (CBDT), the taxman of India has been working deliberately on operationalising the proposal. The Centre expects the revised tax structure to attract more customers to perform digital transactions on account of the built-in incentives.
Banks and PSPs who want their systems to be prescribed eligible by the government can submit the details of Permanent Account Number (PAN) and license number on CBDT-authorised platforms.
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