A big decision has been taken in the GST Council meeting regarding debit and credit card transactions. According to information received by CNBC Awaaz from sources, now 18% GST will be levied on credit card and debit card transactions below Rs 2000. Payment gateways will not get any exemption in this.

After this decision, 18% GST will be levied on the merchant fee of the transaction. The GST Fitment Committee is of the opinion that 18% GST should be levied on this income from payment aggregators. The committee believes that this type of GST is unlikely to affect customers.

GST will be collected from payment gateways and aggregators

Actually this GST will be collected from the payment aggregator. Payment aggregator is a third party platform and helps a merchant to accept payment amount. Razorpay, Paytm and Google Pay are examples of payment aggregate.

Also Read: Attention FD holders! This bank has started a new amazing scheme, know the changed interest rates too

Actually, payment aggregators charge some money from merchants for providing their services. This is 0.5-2 percent of every transaction. However, most aggregators keep it at 1 percent. The government charges service tax on this 0.5-2 percent amount. Therefore, it will not have a direct impact on common people. But it will create problems for small shopkeepers.

GST Council meeting held in Delhi

The GST Council meeting was held today under the chairmanship of Finance Minister Nirmala Sitharaman. The meeting focused on GST rates on insurance policies and important decisions were taken in the interest of customers.

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The Reserve Bank has directed banks to provide eligible customers the option to choose from multiple card networks while issuing credit or debit cards. The central bank has also asked credit card issuers not to enter into any agreement or arrangement with the card networks that prevents customers from availing the services of other networks.

The Reserve Bank of India (RBI) said in a circular, ‘Upon review, it was found that some of the arrangements existing between card networks and card issuers are not conducive to providing choice to customers.’

RBI has given these important guidelines.

The central bank said, ‘In such a situation, it is directed that the card issuers will not make any such arrangement or agreement with the card network which prevents the customers from availing the services of other card networks. .” RBI said that for existing cardholders, this option can be given at the time of next renewal of the card.

American Express Banking Corp, Diners Club International Ltd, MasterCard Asia/Pacific Pte Ltd, National Payments Corporation of India-Rupay and Visa Worldwide Pte Ltd are listed as card networks. According to the circular, card issuers and networks will have to ensure adherence to RBI guidelines in existing agreements at the time of amendment or renewal and while executing new agreements.

However, this instruction will not be applicable to those credit card issuers whose number of active cards issued by them is 10 lakh or less. Apart from this, institutions issuing credit cards on their own authorized card networks have been excluded from the instructions of this circular. According to this, the instructions to give eligible customers the option to choose from multiple card networks will be effective for six months from the date of issue of the circular.

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Is. The Finance Ministry said in a statement on Thursday that through the Foreign Exchange Management (FEMA) Amendment Rules, 2023, spending abroad through credit cards has also been included in the LRS scheme of the Reserve Bank of India (RBI).

New rates will be applicable from July 1

This will enable ‘Tax Collection at Source’ (TCS) at the applicable rates on the amount spent abroad. If the person paying TCS is a taxpayer, he can claim credit or set-off against his income tax or advance tax liabilities. In this year’s budget, it was proposed to increase TCS from five percent to 20 percent on foreign tour packages and money sent abroad under LRS. The new tax rate will be effective from July 1.

Amendment made in the FEMA law

The ministry had issued a notification in this context on Tuesday itself and informed about the amendment in the FEMA law. Post inclusion of LRS in this notification, any remittance of foreign currency above Rs 2.5 lakh will require RBI approval. Prior to this notification, international credit card payments for expenses incurred while traveling abroad were not eligible for LRS.

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Removed Section 7

The Ministry of Finance, in a notification issued after consultation with RBI, has removed Section 7 of the FEMA Act, 2000. Due to this, payments made abroad through international credit cards have also come under the ambit of LRS.

Answers given by the Ministry

The Ministry has tried to clarify the situation by releasing a list of related questions and their answers on this change. It said that debit card payments were already covered under the LRS, but credit card expenses abroad did not come under this limit. Because of this many people used to cross the LRS limit.

RBI wrote a letter to the government

Data received from companies providing the facility of sending money abroad revealed that international credit cards are being issued with permission to spend more than the current LRS limit of Rs 2.50 lakh. According to the ministry, the RBI had also written to the government several times that the differential treatment of foreign debit and credit payments should be done away with.

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RBI gave information

According to the information given by RBI, the purpose of these new rules is to make payment through credit and debit cards more secure than before. Actually, for the last few days, many reports of fraud with credit-debit cards were coming to the fore. But after the implementation of the new rule, if customers do transactions online, point of sale (POS) or app with debit or credit card, then all the details will be saved in the encrypted code.

Know what is this tokenization system?

The token system converts all debit and credit card data into ‘tokens’. By which the information of your card is kept hidden in the device. RBI has said that any person can convert the card into token by requesting the token bank. There is no charge to the cardholder for tokenizing the card. If you convert your card into a token, then your card information can be saved in the token on any shopping website or e-commerce website.

In this new rule of RBI, without taking approval from the customer, his credit limit cannot be increased. Not only this, if any payment has not been made then the charges or taxes etc. cannot be capitalized while adding interest. This will not harm the customers, many times such incidents come to the fore when any new steps related to many cards are taken by the banks or by the credit card issuing institution.

Fraud cases will be less

The Reserve Bank says that due to the implementation of the new rule, the cases of fraud will be reduced due to the implementation of the payment system. Actually, due to leaking of credit card or debit card information of customers, the risk of fraud with them increases. The Reserve Bank has said that at present, e-commerce websites, merchant stores and apps etc. store the card details after the customers make payment with debit card and credit card. In many cases, merchants are left with no option but to store the card details before the customers. If these details are leaked, there is a possibility of loss to the customers. But when the new rules are implemented then such incidents will be stopped.

There is a lot in the new provision

The most important thing in the new provisions of RBI is that the information related to the transactions done through the card will not be given to the ‘branding partner’. These provisions may affect the business model of companies operating in the co-branded card segment, as these companies entice customers with various offers based on these transactions. In such a situation, now the customers will not have the fear of falling in any kind of hoax. Also, there will be no risk of financial loss regarding the card.

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