GST not payable on govt incentive to banks for promoting RuPay card, low value BHIM-UPI transactions

Incentives paid by the government to banks for promoting RuPay debit cards and low-value BHIM-UPI transactions will not attract GST, the finance ministry said.

Last week, the cabinet cleared a Rs 2,600-crore incentive scheme for banks to promote RuPay debit cards and low-value BHIM-UPI transactions in the current fiscal.

Under the Incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions, the government pays banks an incentive as a percentage of the value of RuPay Debit card transactions and low-value BHIM-UPI transactions up to Rs 2,000.

The Payments and Settlements Systems Act, 2007 prohibits banks and system providers from charging any amount from a person making or receiving payments through RuPay Debit cards or BHIM.

In a circular to chief commissioners of GST, the ministry said the incentive is in the nature of a subsidy directly linked to the price of the service and the same does not form part of the taxable value of the transaction in view of the provisions of the Central GST Act, 2017.

As recommended by the Council, it is hereby clarified that incentives paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are in the nature of subsidy and thus not taxable, it said.

In December alone, UPI achieved a record of 782.9 crore digital payment transactions with a value of Rs 12.82 lakh crore.

Separately, the ministry has also clarified the applicability of GST on accommodation services supplied by Air Force Mess to its personnel.

It said that the revenue department had received references requesting clarification on whether GST is payable on accommodation services supplied by Air Force Mess to its personnel.

Currently, all services, barring a few specified services such as services of the postal department, transportation, supplied by Central or State Governments, or local authority to any person other than business entities are exempt from GST.

It is hereby clarified that accommodation services provided by Air Force Mess and other similar messes, such as Army mess, Navy mess, Paramilitary and Police forces mess to their personnel or any person other than a business entity are covered by Sl. No. 6 of notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 provided the services supplied by such messes qualify to be considered as services supplied by Central government, state government, Union territory or local authority, the ministry said.

CBIC has clarified that accommodation services provided by Air Force Mess, Army mess, Navy mess, Paramilitary, and Police forces mess to their personnel or any person other than a business entity are tax neutral. This clarification would help restrict the cost of accommodation services for our elite forces services, AMRG & Associates senior partner Rajat Mohan said.