Several payment gateway service providers are defying a government notification by charging merchants a fee for enabling and using the Unified Payments Interface (UPI) and RuPay cards, reports Economic Times.
The Central Board of Direct Taxes (CBDT) has queried the service providers on their stance with respect to charges for UPI and RuPay card transactions.
In August 2020, the CBDT has directed the banks to refund any fees collected for payments using RuPay or UPI.
As per a December 2019 notification, the government had designated UPI and RuPay as prescribed modes of payments against which charges cannot be imposed by banks and service providers.
However, bankers have largely opposed this prohibition on charges citing the lack of compensation for those who provide the payment infrastructure.
Last week, the Reserve Bank of India (RBI) had announced the formation of a fund for the development of payments infrastructure.
However, the fund will be utilised to compensate those who rope in retail shopkeepers and other essential services in the north-eastern states and other small towns.
Payment gateway service providers believe that they can offer free services to small merchants but they assert that a big cost goes into processing payments made to large online merchants.
Banks believe that zero fees can slow down merchant acquisition but PayTM capitalized on this situation by incentivizing merchants to on-board them on its network.
The e-commerce company does not charge merchants for facilitating UPI and RuPay debit card payments online.
Banks are now actively advocating for the removal of ban on these charges as the Union Budget is set to be rolled out on 1 February.
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