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Ministry of Finance clarifies that the provisions of section 269SU of the Income-tax Act shall not be applicable to B2B transactions

May 21, 2020

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Context

In a move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961, vide the Finance (No.2) Act 2019. This section requires every person carrying on business and having sales/turnover/gross receipts from business of more than Rs 50 crore in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes. Subsequently, vide notification no. 105/2019 dated 30.12.2019 the following modes were notified as “prescribed electronic modes”:

  • Debit Card powered by RuPay
  • Unified Payments Interface (UPI) (BHIM-UPI)
  • Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)

The industry and stakeholders raised concerns over the provisions set out by the Government. Accordingly, NASSCOM made a representation to the CBDT and Department of Revenue, Ministry of Finance highlighting the issues faced by the IT industry due to prescribed electronic modes under section 269SU of the Income-tax Act, 1961.

In our representation, we had suggested that, not all businesses should be mandated to provide facilities for accepting payments through electronic modes, especially export transactions, Business to Business (B2B) transactions and organisations, which anyway receive 100% of payments through digital modes (but modes other than the mandated modes).

Read our detailed submission here.

Clarification issued by the Ministry of Finance

The Government issued a clarification vide notification no. 12/2020 dated 20.05.2020, stating that provisions of section 269SU of the Act shall not be applicable to a specified person having only B2B transaction s (i.e. no transaction with retail customer/consumer) if at least 95% of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by any mode other than cash.

It has also stated that this clarification is based on the representations that have been received by it, stating that the requirement of mandatory facility for payments through the prescribed electronic modes is generally applicable in B2C (Business to Consumer) businesses, which directly deal with retail customers. Moreover, since the prescribed electronic modes have a maximum payment limit per transaction or per day they are not so relevant to B2B (Business to Business) businesses, which generally receive large payments through other electronic modes of payment such as NEFT or RTGS.

Mandating such businesses to provide the facility for accepting payments through prescribed electronic modes would cause administrative inconvenience and impose additional costs, the clarification added.

Please find a copy of the notification issued by the Government attached along with this blog. In case, you have additional queries regarding this issue, please write to komal@nasscom.in.

 


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Download Attachment

25206-20200520-mof-cbdt-clarifications-in-respect-of-prescribed-electronic-modes-under-section-269su-of-the-income-tax-act-1961.pdf

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Komal Gupta
Policy Analyst

Policy Professional| Former Tech and Business Journalist|

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