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The Indian government's proposed 18% Goods and Services Tax (GST) levy on payment aggregators' income from transactions under Rs 2,000 has sparked debate and uncertainty within the industry. The decision on this recommendation has been deferred and will be referred to the fitment committee, as announced by Uttarakhand Finance Minister Premchand Aggarwal. This move comes after several large payment aggregators, including BillDesk and CCAvenue, received notices from the GST authorities demanding tax on fees charged for processing these digital transactions.
The potential impact of this GST levy is significant considering that over 80% of digital payments in India fall below Rs 2,000. Payment aggregators had previously not charged GST on these transactions, following a government notification issued during demonetisation in 2016. This exemption had been crucial for promoting digital transactions and financial inclusion. However, the recent notices issued to payment aggregators suggest a change in the government's stance.
The referral to the fitment committee signals a period of deliberation and potential renegotiation. The committee will evaluate the implications of the proposed GST levy on the payments industry and its impact on digital adoption and economic growth. While the government aims to broaden its tax base and ensure fair taxation, the industry argues that imposing GST on small transactions could create administrative burdens and discourage digital payments. The outcome of this process will have far-reaching consequences for the future of digital payments in India.