On the one hand, the government is appealing for more and more digital transactions, on the other hand, many banks are now charging charges on digital transactions too. In such a situation, banks have been asked by the Finance Ministry, not to levy any charge on electronic transactions.
Today, by tweeting on behalf of the Central Board of Direct Taxes (CBDT), it was said that if a bank has collected merchant discount rates (MDR) on any digital transaction from/after January 1, 2020, then it should return. The CBDT also said that the bank should stop charging the charges on any such transactions in the future.
CBDT has issued Circular no. 16/2020 on 30th August, 2020 advising banks to immediately refund the charges collected, if any, on or after 1st January, 2020 on transactions carried out using the electronic modes prescribed under section 269SU of the Income-tax Act,1961.(1/2) pic.twitter.com/Dw0D5oVi8T
— Income Tax India (@IncomeTaxIndia) August 30, 2020
It has been said from the Ministry that there are several reports that some banks are charging the UPI transaction. These banks are offering some transactions free of cost, and Merchant Discount Rates (MDR) are being charged for transactions beyond that limit. The Finance Ministry has clearly stated that it is against the CBDT circular dated 30 December 2019.
MDR is the fee that the shopkeeper charges from you on payment by debit or credit card. You can say that this is a fee on the payment facility by debit or credit card. The shopkeeper does not get the money received from MDR. He has to pay MDR in lieu of every payment made by the card.
On payment by credit or debit card, the amount of MDR is divided into three parts. The largest portion goes to the bank that issued the credit or debit card. After this, some part gets to the bank whose Point of Sale (PoS) machine is installed with the shopkeeper. In the end, some part of the MDR gets to the payment company. Visa, MasterCard, Rupay, and American Express are the major payment companies.