1. Section 269SU
Section 269SU requires every person who is carrying on business to provide the facility for accepting payments through prescribed electronic modes. These prescribed modes will be in addition to the facility for any other electronic mode of payment already provided to customers by such person.
Section 269SU is applicable to a person when the total sales, turnover or gross receipts from business exceeds Rs 50 crore during the immediately preceding previous year. The section is applicable from 1 November 2019. In such a case, the section is applicable if the sales, turnover or gross receipts exceed Rs 50 crore for the financial year ended 31 March 2019.
2. Rule 119AA notified modes for acceptance of payment
The Central Board of Direct Taxes (CBDT) has notified the prescribed modes of payment for the purpose of section 269SU:
The Rule 119AA is applicable from 1 January 2020. Hence, from 1 January 2020, any person to whom the provisions of section 269SU are applicable should make available to its customers the methods of payment prescribed in Rule 119AA.
3. Scope of section 269SU and purpose
The introduction of section 269SU is part of the government’s initiative for the promotion of digital payments and a cashless economy. The government is promoting low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain debit cards, NEFT, RTGS etc., to promote a cashless economy. Hence, the government has introduced section 269SU mandating business establishments with annual turnover more than Rs 50 crore to offer certain low-cost digital modes of payment to their customers.
Also, the bank or the payment system provider is mandated to not levy any charges or merchant discount rate on the customers as well as merchants for using the methods of payments prescribed under section 269SU. The Reserve Bank of India and banks have to absorb the costs incurred towards these modes of payment.
4. Penalty for non-compliance
In a case where a person who is covered by the provisions of section 269SU fails to provide the facility of payment under the prescribed modes, such person would be liable for a penalty of Rs 5,000 for every day during which the failure or non-availability of the facility.
The authority to impose the penalty vests with the Joint Commissioner of Income Tax. Such a person would be ordinarily issued a show-cause notice to prove why penalty should not be imposed for non-compliance. Also, the Joint Commissioner may not impose a penalty if the person defaulting with the provisions of section 269SU proves that there were good and sufficient reasons for such failure.
5. Amendment to the Payment and Settlement Systems Act, 2007
A new section 10A was inserted in the Payment and Settlement Systems Act, 2007 with effect from 1 November 2019. The Section mentions that no bank or payment system provider shall impose any charge upon anyone, either directly or indirectly, for using the electronic modes of payment prescribed under section 269SU of the Income Tax Act, 1961. The Section was also introduced by the Finance (No. 2) Act, 2019.
Thus, a bank or a payment system provider would not impose any charge on the person making the payment or the person receiving the payment through the use of any of the prescribed modes under section 269SU.