GST will not be levied on incentives received by banks: Finance Ministry clarification

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- Decision to promote BHIM-UPI payments

AHMEDABAD: The Finance Ministry has said in a clarification that the Goods and Services Tax will not apply to the incentives given to banks by the government to promote debit cards and low-value BHIM-UPI transactions. Last week, the Cabinet approved a Rs 100,000 for banks to promote debit card and low-value BHIM-UPI transactions starting this year. 2600 crore incentive program was approved.

All services supplied by the Central or State Governments or local authorities to a party other than a complete business unit are currently exempt from GST. However, some services like postal department services and transportation are not included in this relaxation.

The finance department has said that the incentive is directly related to the subsidy linked to the value of the service. It does not form part of the taxable value of the transaction under the provisions of the Central GST Act, 2017. As per the Payment and Settlement Systems Act 2007, banks and system providers are not permitted to charge any fee from persons using BHIM or Rupa debit cards to make or receive payments.

The ministry has further clarified that GST is applicable on accommodation services provided by Air Force Mess to its troops. UPI in December itself Rs. 782.9 billion digital payment transaction has set a record.

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