Incentives provided by the government to banks to promote the use of RuPay debit cards and low-value BHIM-UPI transactions would not be subject to the Goods and Services Tax (GST), according to the finance ministry. The Cabinet last week approved a ₹2,600 crore incentive programme for banks to encourage the use of RuPay debit cards and low-value BHIM-UPI transactions this year.
“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.
Currently, all services provided by the Central or State Governments or local authorities to people or groups other than enterprises are exempt from the GST, with the exception of a few services that have been specifically named, such as transportation and services provided by the postal department.
According to the rules of the Central GST Act of 2017, the incentive is in the nature of a subsidy that is directly tied to the cost of the service and does not add to the transaction’s taxable value.
Under the Incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions, the government offers incentives to banks as a percentage of the value of RuPay Debit Card transactions and low-value BHIM-UPI transactions up to ₹2,000.
According to the Payments and Settlements Systems Act of 2007, banks and system providers are not allowed to charge people who use BHIM or RuPay Debit cards to transmit or receive payments.
The ministry has also made it clear that the housing services offered to the Air Force Mess’s servicemen are subject to the GST. According to the report, the tax agency has received enquiries asking if GST is due on lodging services given to Air Force personnel by the Air Force Mess.
