Tax on payment aggregators: The Goods and Services Tax (GST) Council may consider imposing 18% GST on payment aggregators (PAs) for small digital transactions up to Rs 2,000, via debit and credit cards, according to a report.

The proposal will be discussed at the GST Council’s upcoming meeting on September 9.

Payment aggregators, which enable businesses to accept online payments from customers, may soon face this new tax as the GST fitment committee, comprising revenue officials from both the Centre and states, believes that PAs, unlike banks, act as intermediaries for card transactions and should therefore be subject to GST.

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The final decision will be made at the GST Council’s 54th meeting, chaired by Finance Minister Nirmala Sitharaman.

A source told the publication that small businesses that deal with a bulk of low-value transactions daily may be impacted negatively if the GST Council moves ahead with the decision.

This is because payment gateways are likely to pass on the burden to merchants and small business owners.

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As of now, payment aggregators charge merchants a fee ranging between 0.5% and 2% per transaction. But if the GST is imposed, they are likely to shift this additional cost onto merchants.

Presently, payment aggregators are exempt from GST on transactions below Rs 2,000, as they handle various digital payments like QR codes, POS machines, and net banking.

It is worth mentioning that the service tax on transactions under Rs 2,000 was exempted in 2016 after the demonetization of Rs 500 and Rs 1,000 notes.

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