In another push towards a ‘less-cash economy’, the finance ministry on Tuesday said that companies with annual turnover of over Rs 50 crore which do not accept payments through home-grown RuPay and Unified Payments Interface (UPI) platforms will have to pay a penalty of Rs 5,000 every day. This will be applicable with effect from February 1, 2020, a notification issued by the Central Board of Direct Taxes (CBDT) said.
“In order to allow sufficient time to the specified person to install and operationalise the facility for accepting payment through prescribed electronic modes, it is hereby clarified that the penalty shall not be levied if the specified person installs and operationalises the facilities on or before January 31, 2020,” the CBDT notification reads.
The government has said this move will “encourage digital economy” and help India move towards a “less-cash economy”.
Earlier this week, the finance ministry had also announced waiving merchant discount rates (MDR) on transactions through RuPay and UPI platforms beginning Wednesday. This move was strongly criticised by the Payments Council of India — an industry body that represents the payments and fintech companies in the country.
MDR is the rate charged to a merchant for digital payment processing services on debit and credit card transactions, which is usually 1-3 per cent of the overall transaction amount.
In her Budget speech in July, Finance Minister Nirmala Sitharaman had proposed that businesses should offer low-cost digital modes of payment such as Bharat Interface for Money (BHIM) UPI, UPI QR code, Aadhaar Pay, debit cards, National Electronic Funds Transfer, real-time gross settlement, etc to their customers, and no charge or MDR shall be imposed on customers to promote digital payment.
Both UPI, which is the payment interface, and RuPay, a card system, are owned by the National Payments Corporation of India. The government is promoting these platforms in order to reduce dependency on global payment platforms, such as Visa and Mastercard, as part of its initiatives to boost digital payments.