GST is not payable on the government’s incentive to banks for promoting the RuPay card, notwithstanding its low value. Transactions between BHIM and UPI

The government’s incentives to banks for promoting RuPay debit cards and low-value BHIM-UPI transactions would not be subject to GST, according to the Finance Ministry.

The Cabinet approved a Rs 2,600-crore incentive scheme for banks to promote RuPay debit cards and low-value BHIM-UPI transactions during the current fiscal year last week.

The government pays banks an incentive as a percentage of the value of RuPay Debit Card transactions and low-value BHIM-UPI transactions up to Rs 2,000 under the Incentive Scheme for the Promotion of RuPay Debit Cards and Low-Value BHIM-UPI Transactions.

The Payments and Settlements Systems Act of 2007 forbids banks and system providers from charging any fee to anyone who makes or receives payments using RuPay Debit cards or BHIM.

According to a circular to GST chief commissioners, the incentive is like a subsidy directly related to the price of the service. It does not form part of the taxable value of the transaction under the rules of the Central GST Act, 2017.

“It is now clarified, as proposed by the Council, that incentives granted by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are like subsidy and thus not taxable,” it stated.

UPI processed 782.9 crore digital payment transactions worth Rs 12.82 lakh crore in December alone.

Separately, the Ministry has clarified the application of GST on lodging services provided by the Air Force Mess to its troops.

According to the statement, the tax agency had received referrals demanding clarity on whether GST is payable on housing services provided by Air Force Mess to its troops.

All services, except a few defined services such as postal services and transportation, provided by the Central or State Governments or local authorities to any individual other than business organisations are exempt from GST.

“It is at this moment clarified that accommodation services provided by Air Force Mess and other similar messes, such as Army Mess, Navy Mess, Paramilitary and Police Force Mess to their personnel or any person other than a business entity are covered by Sl. No. 6 of notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 provided such services qualify to be considered as services supplied by Central Government, State Government, Union Territory or l.

“CBIC has clarified that accommodation services provided by Air Force Mess, Army mess, Navy mess, Paramilitary, and Police forces mess to their personnel or any person other than a business entity are tax neutral. This clarification would help restrict the cost of accommodation services for our elite forces services,” AMRG & Associates Senior Partner Rajat Mohan said.

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