The Central Board of Indirect Taxes & Customs ( CBIC ), through the Circular No. 245/02/2025-GST clarified that GST exemption under Sl. No. 34 of notification No. 12/2017-CTR dated 28.06.2017 available to RBI-regulated Payment Aggregators ( PAs ) in relation to settlement of an amount, up to two thousand rupees in a single transaction, transacted through credit card, debit card, charge card or other payment card services, as PAs fall within the definition of ‘acquiring bank’ given in the Explanation to the said exemption entry.
The representations have been received asking for clarification on whether Payment Aggregators (PAs) are eligible for the GST exemption under Sl. No. 34 of notification No. 12/2017-CTR dated 28.06.2017 when settling a transaction involving up to two thousand rupees using a credit card, debit card, charge card, or other payment card services.
Payment Aggregators (PAs) are organizations that let e-commerce sites and merchants accept several forms of payment from their clients without requiring them to develop their own payment integration system. Customers’ payments are received by PAs, who then combine them and send them to the merchants within a predetermined window of time.
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Acquiring banks are eligible for the exemption under Sl. No. 34 of notification No. 12/2017-CT(Rate) dated 28.06.2017. The following definition of “acquiring bank” has been provided for the purposes of the aforementioned exemption entry:
Any banking organization, financial institution, including nonbanking financial organizations, or other individual that pays anyone who takes such a card is referred to as the “acquiring bank.” According to “Settlement and Escrow Account Management” clause 8 of the RBI’s Guidelines on Regulation of Payment Aggregators and Payment Gateways, dated 17.03.2020, PAs are required to complete the final settlement with the merchant within the time frames set by the RBI after receiving payments from clients in an escrow account.
For the purposes of the exemption under Sl. No. 34 of notification No. 12/2017-CTR dated 28.06.2017, the RBI-regulated PAs that are involved in the settlement process of making payments to the merchant are covered by the second part of the definition of an acquiring bank, which is “any other person, who makes the payment to any person who accepts such card.” This is because they make payments to merchants who accept credit cards, debit cards, charge cards, or other payment card services.
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Furthermore, taking into account their roles in relation to managing payments, the RBI’s Guidelines of 17.03.2020 explicitly distinguish between Payment Aggregators and Payment Gateways (PGs). PAs are organizations that collect consumer payments, combine them, and then send them to merchants within a predetermined window of time. PGs, on the other hand, are organizations that offer the technological infrastructure needed to process and route online payments without getting involved in money handling.
In accordance with the 55th GST Council’s recommendation, it is made clear that RBI-regulated Payment Aggregators (PAs) are eligible for GST exemption under Sl. No. 34 of notification No. 12/2017-CTR dated 28.06.2017 when settling a transaction involving up to two thousand rupees made using a credit card, debit card, charge card, or other payment card services. This is because PAs are defined as “acquiring banks” in the Explanation to the aforementioned exemption entry.
It is also made clear that this exception excludes Payment Gateway (PG) services and is solely applicable to payment settlement functions, which entail handling money.
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