In recent months, the Department of Financial Services (DFS) has asked banks, the Reserve Bank of India, and the National Payments Corporation of India for feedback on the current Goods and Services Tax (GST) slab for filing tax returns. According to three banking sources with an understanding of the current scenario, some lenders have suggested raising the annual turnover threshold for merchants.
GST Slab May Rise To Rs 1 Crore
The report claims that DFS has asked banks, the RBI, and NPCI for opinions on the current GST threshold for filing returns in recent months. The potential of increasing the slab from the present ₹40 lakh for goods and ₹20 lakh for services to ₹1 crore in yearly turnover has been discussed.
Following letters from Karnataka’s Commercial Tax Department to merchants with an annual revenue above ₹40 lakh, which was determined by using UPI transactions, this proposal was made.
MDR Plan Under Review
Also being reviewed is the MDR plan. Payment firms charge merchants a fee known as MDR in exchange for processing digital transactions. Following the reduction of government subsidies for UPI transactions earlier this year, payment companies have been pushing for their restoration. The ₹1 crore threshold’s supporters contend that it would keep incentives for taking UPI payments while insulating small businesses from the administrative strain of GST compliance.
DFS Consultations Focus On Tax Policy And Payment Ease
The Department of Revenue and the GST Council are in charge of tax policy, but DFS is essential in interacting with financial institutions and assessing the financial effects. According to sources, DFS regularly engages with stakeholders on these kinds of reviews; however, any modifications would be dependent on political factors.
Additionally, the RBI is researching the operating expenses of UPI, which may have an impact on future regulations on transaction fees and merchant adoption tactics. The combined measures seek to strike a balance between ease of doing business, tax compliance, and the ongoing development of India’s digital payments infrastructure.
Conclusion
An important turning point in the history of digital payments in India is marked by the reconsideration of GST slabs and MDR costs. Any change in policy will have an impact on merchant acceptance as well as the long-term viability and inclusiveness of UPI growth.
Finding a middle ground, supporting merchants, ensuring tax compliance, and maintaining the growth of the digital economy are the challenges as DFS, RBI, and NPCI balance the advantages and disadvantages.
The ultimate decision will depend on political will and financial priorities, but raising the GST level and restoring MDR subsidies would allow small firms some breathing room.
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