MUMBAI: The issue of goods and services tax (GST) on the interplay of transactions between a bank or Unified Payments Interface (UPI) gateway and an e-commerce portal/shop is increasingly coming up for examination in the course of assessments.
Customers who use a particular credit card or UPI gateway while shopping get an outright discount or a cash-back offer. A full or part reimbursement of this incentive by the bank to the e-portal or even a joint arrangement between the two parties (which could be considered a barter of services) is likely to attract GST, say tax experts.

A few government officials TOI spoke to said the argument that the discount/cash-back is available to the end customer and hence there should be no GST on the transactions between bank/UPI payment gateway and the e-portal typically holds no weight.
Trade discounts are exempt from GST. However, chartered accountant Sunil Gabhawalla explains that these arrangements will not qualify since the transaction of the underlying product against which a discount or cash-back is offered (say, a mobile phone) does not take place between the bank/UPI payment gateway and the e-portal/shop.
The exact terms and conditions of the arrangements between the two parties are crucial in determining the GST implications. Price Waterhouse indirect tax partner Pratik Jain states that if the bank/UPI payment gateway commits certain payouts/other benefits to the e-portal for promoting use of their services, the same may qualify as a ‘service liable to GST’ (to the extent the benefit accrues to or is retained by the portal).
“Elaborate clauses in the agreement between the two parties dealing with promotion, co-branding and marketing activities could suggest that there is a provision of service by one entity to another, resulting in the levy of GST. For example, a reimbursement of the share of cash-back by the bank would be treated as a taxable marketing service,” adds Gabhawalla.
Other models may also attract GST. “If the bank/UPI payment gateway partners with the seller/e-commerce platform under a co-branding arrangement (even if it does not involve any exchange of monetary consideration), it could be construed as a barter of services and be subject to GST,” explains Jain. In such cases, the value of the transaction is often a contentious issue, adds an in-house expert of a shopping portal.
“However, if the bank/UPI payment gateway merely joins hands with the seller/e-portal, both work on an independent basis and offer discounts/incentives on their own account directly to the customer, there may be no GST implications. This is because, arguably, neither of the parties derive any benefit from the other. Clear cut language in the contractual documents is a must,” states Jain. According to tax experts, the GST Council should examine these issues and come out with a clarificatory circular.