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March 16, 2021

Government plans to include GST in UPI QR code

by CA Jessica Nagaonkar in GST

Government plans to include GST in UPI QR code

Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India (RBI) and works by instantly transferring funds between two bank accounts on a mobile platform. The government now is looking at upgrading the QR code for UPI in such a way that it can incorporate the GST component and show the same separately. This would enable the government to formulate fiscal incentives for digital payments.

The concept of dynamic Quick Response (QR) Code under GST was introduced by CBIC through Notification No. 14/2020 – Central Tax on 21st March 2020. To promote digitization and digital payment, Dynamic QR code was brought into the picture by the government. A dynamic QR code is a QR code with a short redirection URL encoded in it. The information you are trying to communicate is not encoded in the QR code itself, like a static QR code. Instead, the information you’re trying to communicate is on a website, and a dynamic QR code redirects to that website. Also, that redirection URL can change. Unlike a static QR code, the information in a dynamic QR code can change without needing a new code.

Having a dynamic QR code indicates that QR code which is to be printed on the invoices shall have to configured/made by the taxpayer himself and that the Government will not be generating for the taxpayers unlike Invoice Reference Number and QR Code which is generated by Invoice Registration Portal (IRP) for taxpayers falling the requirement of E-Invoicing. The benefits of the Dynamic Quick Response (QR) code are:

  • Every dynamic QR code generated is unique.
  • There is control on the supply value.
  • The payee cannot change the value.
  • The amount can be paid easily by using any UPI app.

NPCI is working on UPI to make this feature of upgrading the QR code for UPI possible. When both ends of the payment are driven by software with information going to a cloud, there is no limit to the innovation that can take place. Additionally, the information provided to the merchant and customer can grow manifold. NPCI was working with banks and payment companies to create the capacity to handle a billion UPI transactions daily.

UPI has grown has tectonically increased by 250% in the previous nine months. It is a journey where everyone has to keep investing. Speaking at the event organized by Paytm to launch an upgraded version of its soundbox, Paytm founder said that in the previous 18 months, the company has traded/sold 9 lakh point-of-sale (PoS) devices and is further planning to upgrade 50 lakh merchants for the purpose of accepting contactless payment over smartphones and IoT (internet of things or net-connected) devices. The payment company also launched a software application developed jointly with Visa which enables any NFC-equipped smartphone to accept contactless card payments from all card networks. Paytm was already working on developing the dynamic QR that could incorporate GST.

Visa’s India chief in the same event opined that with 25 billion IoT devices in the world, the scope for contactless payments has increased. He said that over 50 countries have increased their limit for contactless payments and the RBI has also revised the limit after analysing years of fraud data.

On the proposed licences for the new umbrella entities proposed by the RBI, Visa’s India chief said that the heterogeneous nature of the Indian market meant that one size does not fit all. He pointed out that there were under-penetrated segments in digital payments, such as B2B transactions and cross-border remittances. He also said that it required a thousand flowers to bloom to satisfy the appetite of India.

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