RBI's auto debit rule to cause tax worries for fintech companies: Report

The Reserve Bank of India’s (RBI) new policy on auto debit has raised concerns for the fintech companies that have made a common platform for banks to ensure easy transfer of money with compliance.

The RBI’s auto debt policy came into effect on October 1. Under the new norms, banks are now required to inform customers in advance about recurring payments due and transactions would be carried following the nod from the customer. For recurring payments above Rs 5,000, banks are required to send a one-time password to customers as per the new guidelines.

Also Read | RBI may again opt for status quo on key policy rate next week: Experts

However, this announcement came as bad news for the fintech companies as they run the risk of attracting a 2-per cent equalisation levy, as well as additional goods and services tax (GST) at 18 per cent on the money they make, according to a report by The Economic Times.

“The 2 per cent equalization levy – as the definition suggests – is applicable on any overseas transaction and it could be levied even where the merchant or the companies that are charged are not based in India,” ET quoted Girish Vanvari, founder of tax advisory firm Transaction Square.

Also Read | RBI policy, global trends to dictate stock market this week: Analysts

ET further quoted MS Mani, partner Deloitte India, “Services provided by fintech companies for validating transactions could attract GST on both the setup fees and transaction fees charged by them.”

RBI, in the announcement, had stated that the requirement of an additional factor of authentication (AFA) has made digital payments in India safe and secure and the primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience.

Watch the latest DH Videos here: