The Indian government is now considering a new proposal regarding GST and UPI. It is considering imposing 18% GST on UPI Transactions below Rs. 2000.
As you might already know, UPI Payments are free for consumers. Thus, making them a popular and easy choice for small transactions. However, now the government is reviewing the idea of taxing UPI transactions along with payments made through debit and credit card and that too at the tax rate of 18%.
Impact on Consumers if Government Imposes 18% GST on UPI Transactions
Consumers will face higher transaction costs if GST on UPI Transactions is imposed. This might lead to people again using cash or other payment methods for small amounts.
Impact on Small Businesses
Small businesses will have to face additional financial burdens because many MSMEs use UPI due to low cost and an 18% can affect their margins. GST for small businesses is already a huge concern and this new proposal can add more pressure on them.
Impact on Payment Aggregators
Payment aggregators enable UPI, and card transactions struggle with profitability due to a zero-fee structure. Hence, introducing GST could help them cover some of their operational costs.
How Will the GST Work on UPI Transactions?
GST is being applied online to a wide range of goods and services. However, digital payments have been mostly excluded. The idea involves taxing UPI transactions below ₹2,000, aligning them with other services taxed under the Goods and Services Tax. So, If GST on UPI Transactions is implemented, the additional cost of GST services might be applied to the overall transaction value, increasing the cost of UPI payments for customers.
Conclusion
The implementation of GST on UPI transactions has both positive and negative aspects. It enables payment firms to continue operating. However, this may increase the cost of digital payments for consumers and small enterprises. Therefore, The GST Council is still discussing it. As a result, businesses and consumers should start preparing how they deal with GST and UPI.
Moreover, If you want any other guidance relating to GST Registration on readymade garments, please feel free to talk to our business advisors at 8881-069-069.
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