Key Analysis – Section 269SU

Posted by CA Kanchan
On 21 Feb 2020

Section 269SU has been introduced by the Government of India, under Income Tax Act with an intention to promote cashless economy and digital mode of accepting payment

What is Section 269SU ?


This Section Prescribes, the electronic modes for acceptance of payment for businesses and it  mandates every specific business, to have a certain mode of accepting payments

Specified Business / Who is covered under Section 269SU ?


Section 269SU is applicable to all Assessee whether they are Individual, HUF, Company, LLP or having any other status (irrespective of whether resident or not) if they are carrying business and, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees (50 Crores) during the immediately preceding previous year. So current provisions of section 269SU read along with Rule 119AA, will also be applicable to the following categories of assessees-

a. an assessee engaged in B2B business model;
b. an assessee which is 100 percent export-oriented (i.e. no domestic sales, and therefore, all payments will always be received through normal banking channels); and
c. a foreign company carrying on the business through a Permanent Establishment (PE) in India.

What are the modes of accepting payments?


The CBDT has notified the prescribed modes of payment for the purpose of section 269SU:
a. Debit Card powered by RuPay
b. Unified Payments Interface (UPI) (BHIM-UPI)
c. Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)

 the bank or the payment system provider is mandated to not levy any charges or merchant discount rate on the customers as well as merchants for using the methods of payments prescribed under section 269SU

What is the Penalty ?


As per Section 271DB
In a case where a person who is covered by the provisions of section 269SU fails to provide the facility of payment under the prescribed modes, such person would be liable for a penalty of Rs 5,000 for every day during which the failure or non-availability of the facility. However, no penalty would be levied if the person installs and operationalises the prescribed payment facility by 31 January 2020. The penalty of Rs 5,000 per day would be leviable from 1 February 2020



SOME OTHER KEY POINTS:-

1. What Turnover Means and do it include GST?
In the statement issued by ICAI on the companies (Auditors’ Report) Order 2016 the word ‘turnover’ has been defined as under:-
“The term ‘turnover’ for the purposes of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by enterprises”
Turnover does not include GST.

2. What is the Date of the Applicability of Section 269SU?
The said provision is made applicable from 1st January 2020

3. Whether the provision of this section is applicable if the business income is exempt under income tax act?
It is not necessary that the income must be chargeable to income tax. Even if the income is exempt but the activities carried on by the person qualifies as ‘business’, the provision of this section will apply

4. What are the bank charges for using prescribed electronic payment modes?
As per the newly inserted section 10A of the Payment and Settlement Systems Act, 2007 banks will not impose any charges on digital payment made through prescribed electronic modes, for both payer and receiver.



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