The Goods and Services Tax (GST) Act, 2017, introduced in India, provides a section specifically regarding digital payments to recipients. This section is Section 31A: “Facility of digital payment to recipient.”

Here’s what you need to know about the facility of digital payment to recipients under the GST Act, 2017:

1. Purpose:

• Section 31A aims to promote transparency and accountabilityin financial transactions by encouraging digital payments.
• It makes businesses offering goods or services liable to provide certain digital payment optionsto the recipient GST Act, 2017.

2. Scope:

• The Government, based on the recommendations of the GST Council, has the power to prescribe categories of registered personswho must offer digital payment options.
• Currently, no such notification has been issued, implying it’s not mandatory for all businessesto offer digital payment facilities GST Act, 2017.

3. Requirements:

• If a business falls under the category prescribed by the Government, it should provide at least one prescribed mode of electronic paymentto the recipient.
• This could include options like UPI, credit/debit cards, online banking, etc.
• The business must also give the recipient the option to choose this digital payment methodwhile making the payment GST Act, 2017.

4. Benefits:

• By promoting digital payments, Section 31A fosters a more cashless economywith increased transparency.
• It reduces the risk of tax evasionand improves overall business compliance.
• Additionally, it provides convenience and securityfor both businesses and recipients GST Act, 2017.

5. Current Status:

• As mentioned earlier, the Government hasn’t yet notified any specific categories of businesses who must offer digital payment options.
• So, for now, the provision in Section 31A is more of a potential future requirementand not an immediate obligation for all businesses GST Act, 2017.

EXAMPLES

General examples applicable across India:

1. UPI (Unified Payments Interface):Most popular platform for instant bank transfers through mobile apps. Widely accepted and promotes cashless transactions.
2. IMPS (Immediate Payment Service):Interbank electronic fund transfer system available 24/7. Offers immediate credit to beneficiary account.
3. RTGS (Real Time Gross Settlement):High-value transactions settled in real-time on a gross basis. Suitable for large payments over Rs. 2 lakhs.
4. NEFT (National Electronic Funds Transfer):Batch settlement system available throughout banking hours. Lower transaction fees compared to RTGS GST Act, 2017.
5. Payment Gateways:Online platforms like Paytm, Razorpay, etc., enable businesses to accept payments through various methods like credit cards, debit cards, net banking.
6. Mobile Wallets:Stored value accounts in mobile apps for digital payments at stores, online recharges, etc. Offer convenience and contactless transactions GST Act, 2017.

Specific state variations:

• Karnataka:”Digital Karnataka” initiative promotes e-payments through awareness campaigns and infrastructure development.
• Maharashtra:”MahaGST” portal facilitates online GST filings and payments, simplifying compliance for businesses.
• Telangana:”T-Wallet” is a state-backed mobile wallet promoting financial inclusion and digital transactions.
• Andhra Pradesh:”AP FinTech Valley” aims to attract fintech startups and create a digital payments ecosystem.
• Kerala:”K-DISC” offers digital solutions for various government services, including online tax payments.

Additionally:

• Consider state-specific e-payment initiatives when choosing a payment method.
• Ensure the chosen method is GST compliant and generates proper invoices with necessary details.
• Educate your recipient about different digital payment options available in their state GST Act, 2017.

FAQ QUESTION

Q: What is the “Facility of Digital Payment to Recipient” under the GST Act, 2017?

A: Section 31A of the GST Act empowers the government to mandate certain registered suppliers to offer digital payment options to their customers for goods and services they purchase. This aims to promote transparency, reduce cash transactions, and improve tax compliance.

Q: Who is required to offer this facility?

A: The government, based on recommendations from the GST Council, can specify a class of registered persons who must comply under GST Act, 2017. Currently, no such notification has been issued, so no category of suppliers is obligated to offer digital payment options as of December 13, 2023.

Q: What kind of digital payment options must be provided?

A: The Act doesn’t prescribe specific modes of payment. However, if mandated, the government would likely specify preferred options like UPI, RuPay debit cards, credit cards, etc., under GST Act, 2017 while ensuring inclusivity for users without access to certain technologies.

Q: Is it mandatory for recipients to use digital payments if offered?

A: No, recipients would have the option to choose between digital and other payment methods like cash or cheque. The aim is to encourage, not force, the use of digital payments.

Q: What are the benefits of this facility?

A:

• For recipients:Increased transparency, convenience, and potential security advantages compared to cash.
• For suppliers:Reduced risk of cash handling errors and potential improvement in tax compliance.
• For the government:Improved tax collection and monitoring, reduction in black money circulation GST Act, 2017.

Q: Are there any penalties for non-compliance if it becomes mandatory?

A: The Act doesn’t currently specify any penalties for non-compliance related to Section 31A. However, if the government mandates digital payment options for specific categories, it might introduce penalties for non-adherence in future notifications GST Act, 2017.

CASE LAWS

While there are currently no specific case laws directly interpreting Section 31A of the GST Act, 2017 related to the “Facility of Digital Payment to Recipient,” the section itself and relevant notifications provide insights into its application. Here’s what I found:

Section 31A:

• Introduced through the Finance Bill 2019-20, empowers the Government to prescribe categories of registered persons who must offer digital payment options to their customers for receiving invoices for supplies made.
• The Government is yet to notify any specific categories of taxpayers falling under this requirement.
• Therefore, currently, no registered person is mandatorily obligated to offer digital payment options under Section 31A GST Act, 2017.

Notifications:

• Although no category-specific notifications have been issued, Notification No. 14/2020-CGST dated 21st April 2020 made it mandatory for businesses with a turnover exceeding ₹500 crore in the previous financial year to accept payments through digital modes for the supply of goods or services made to the Government or a Public Sector Undertaking (PSU). This notification falls under Section 32 of the GST Act 2017, not Section 31A, but highlights the government’s focus on promoting digital payments.

Further Considerations:

• Even though not mandatory yet, offering digital payment options is encouraged by the government and incentivized through schemes like discounts or cash back offers to both businesses and consumers.
• Some state governments have also implemented their own initiatives encouraging digital transactions GST Act, 2017.
• The introduction of Section 31A suggests the potential for future implementation of mandatory digital payment requirements for specific categories of taxpayers.

Therefore, while there are no specific case laws currently, understanding the section itself, relevant notifications, and the overall trend towards digital payments can provide valuable insights into the potential future interpretations and applications of Section 31A under GST Act, 2017