PSBs to levy service tax to IMPS, UPI on NEFT transactions above Rs. 1000

In line with the Central Government's objective of promotion of payments through cards and digital means over payments in cash, the Reserve Bank of India (RBI) has recently rationalized customer charges for transactions up to Rs. 1000 settled on Immediate Payment Service (IMPS), Unified Payments Interface (UPI) and Unstructured Supplementary Service Data (USSD) with effect from January 1, 2017 till March 31, 2017.

The RBI has also rationalized the Merchant Discount Rate (MDR) for debit card transactions up to Rs. 2000 with effect from January 1, 2017 till March 31, 2017.

In order to further promote digital and card payments, the Department of Financial Services (DFS), Ministry of Finance has issued a direction in public interest to all Public Sector Banks(PSBs), in accordance with which these banks shall not charge fees for transactions settled on Immediate Payment Service (IMPS) and Unified Payments Interface (UPI) in excess of rates charged for National Electronic Funds Transfer (NEFT) for transactions above Rs. 1000, with service tax being charged at actuals.

For Unstructured Supplementary Service Data (USSD) transactions above Rs. 1000, a further discount of fifty paise on these rates shall apply.