A new Section 279SU has been inserted with effect from November 1, 2019 by the Finance (No.2) Act, 2019. This Section is reproduced below :
“269SU : Acceptance of payment through prescribed electronic modes.—Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.”.
The Central Board of Direct Taxes has also issued the following Circular dated 30-12-2019, in terms of which, every person having a business turnover of more than Rs
SECTION 269SU OF THE INCOME-TAX ACT, 1961, READ WITH RULE 119AA OF THE INCOME-TAX RULES, 1962 – ACCEPTANCE OF PAYMENT THROUGH PRESCRIBED ELECTRONIC MODES – CLARIFICATION IN RESPECT OF PRESCRIBED ELECTRONIC MODES UNDER SAID SECTION
CIRCULAR NO.32/2019 [F.NO.370142/35/2019-TPL], DATED 30-12-2019
In furtherance to the declared policy objective of the Government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961 (“the Act“), vide the Finance (No. 2) Act 2019 (“the Finance Act,”), which provides that every person having a business turnover of more than Rs 50 Crore (“specified person”) shall mandatorily provide facilities for accepting payments through prescribed electronic modes. The said electronic modes have been prescribed vide notification no. 105/2019 dated 30.12.2019 (“prescribed electronic modes”). Therefore, with effect from 01st January, 2020, the specified person must provide the facilities for accepting payment through the prescribed electronic modes. Further, Section 10A of the Payment and Settlement Systems Act, 2007, inserted by the Finance Act, provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Act. Consequently, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01st January, 2020 on payment made through prescribed electronic modes.
In this connection, it may be noted that the Finance Act has also inserted section 27IDB in the Act, which provides for levy of penalty of five thousand rupees per day in case of failure by the specified person to comply with the provisions of section 269SU. In order to allow sufficient time to the specified person to install and operationalise the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271DB of the Act shall not be levied if the specified person installs and operationalises the facilities on or before 31st January, 2020. However, if the specified person fails to do so, he shall be liable to pay a penalty of five thousand rupees per day from 01st February, 2020 under section 271DB of the Act for such failure.
A new Rule 119AA has also been inserted, which reads as under:
119AA. Modes of payment for the purpose of section 269SU.– Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:-
- Debit Card powered by RuPay;
- Unified Payments Interface (UPI) (BHIM-UPI); and
- Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”.
Our views :
At this stage it is not clear as to whether companies which have sales turnovers arising out of B2B transactions, including billing to their own parent companies, are covered by this development. It is also not clear as to whether foreign companies operating in India are covered. It is to be further noted that the Section only requires the seller to implement the following three methods and does not compel the buyer to follow any of these methods to effect payments to the seller.
Though, per se, it would seem that the intent of this new development is to compel retail businesses, shops, etc. to switch to the prescribed modes of payment, the manner in which this Section has been drafted leaves much to be desired.
Some IT companies have already started receiving notices from the Income tax Department on whether they have implemented this Section.