Introduction

Section 31A under the Goods and Services Tax (GST) Act aims to promote digital payments and encourage transparency in business transactions. This section mandates that certain specified taxpayers must provide their customers (recipients) with the option to make payments through digital modes. The objective behind this provision is to reduce cash transactions, improve tax compliance, and ensure that business dealings are more secure and traceable.

In this detailed guide, we will cover the scope, applicability, benefits, and compliance requirements related to the facility of digital payment under Section 31A of the GST Act.

What is Section 31A of GST?

Section 31A of the GST Act was introduced to make it mandatory for specified businesses to offer recipients the option to make payments using prescribed electronic payment modes. This section ensures that businesses provide at least one mode of digital payment to facilitate cashless transactions, thereby supporting the government’s goal of creating a digitally empowered economy.

The provision under Section 31A is part of the broader push towards the Digital India initiative, encouraging taxpayers to adopt digital infrastructure for smoother and more transparent business operations.

Legal Basis of Section 31A

Section 31A was inserted into the GST Act through an amendment to align the GST framework with the growing need for digitization in the Indian economy. It ensures tha recipients (buyers) have the flexibility to make payments electronically, reducing dependence on cash transactions.

The Central Government, under its authority, has prescribed specific payment modes that businesses must provide to comply with this requirement.

Applicability of Section 31A

The facility of digital payment under Section 31A applies to:

• Registered taxpayers with an aggregate turnover exceeding ₹50 crore in any financial year.
• Businesses involved in the supply of goods or services to end consumers (B2C transactions).
• Transactions where an invoice is generated and payment is expected from the recipient.

Who is Exempt from Section 31A?

❌ Registered businesses with an annual turnover of ₹50 crore or below.

❌ Composition scheme taxpayers.

❌ Transactions involving business-to-business (B2B) dealings (unless specified otherwise).

❌ Transactions involving non-taxable or exempt supplies.

Prescribed Modes of Digital Payment Under Section 31A

To comply with Section 31A, businesses must provide at least one of the following electronic

payment options:

1. Credit Cards – Visa, Mastercard, RuPay, etc.
2. Debit Cards – Linked to the buyer’s bank account.
3. Unified Payments Interface (UPI) – Including UPI apps like PhonePe, Google Pay, Paytm, etc.
4. National Electronic Funds Transfer (NEFT)
5. Real-Time Gross Settlement (RTGS)
6. Immediate Payment Service (IMPS)
7. Bharat Interface for Money (BHIM)
8. QR Code-Based Payments

The chosen payment mode must be clearly indicated on the invoice or displayed at the

business premises to inform the recipient about the available options.

How to Comply with Section 31A of GST

1. Display of Payment Options

• Businesses must display the available digital payment methods prominently at their business location.
• Invoices should mention the accepted digital payment options.

2. Enable Digital Infrastructure

• Ensure that the payment infrastructure, such as QR codes or card readers, is functional and accessible.
• Integrate secure payment gateways for online transactions.

3. Maintain Records of Digital Payments

• Maintain a proper record of all digital payments received.
• Ensure that payment records match the details reported in GST returns.

4. Include Payment Details in GST Invoices

• The GST-compliant invoice should mention the available modes of digital payment.
• Ensure that the invoice format aligns with the prescribed GST guidelines.

Example of Section 31A Compliance

Example:

ABC Enterprises, a registered taxpayer, has an annual turnover of ₹75 crore. A customer

visits their store and purchases goods worth ₹5,000.

ABC Enterprises provides the customer with the following payment options:

• UPI (Google Pay)
• Credit Card
• QR Code
• The invoice clearly mentions these available payment options.
• The customer chooses to pay through UPI, and the payment is recorded in the
• company's accounting system.

ABC Enterprises successfully complies with Section 31A by:

• Offering multiple digital payment options.
• Mentioning payment details on the invoice.
• Maintaining records of the transaction.

Penalties for Non-Compliance with Section 31A

Failure to comply with the provisions of Section 31A may result in the following

consequences:

❌ Notice from the GST Department – Businesses may receive a notice for non-compliance.

❌ Monetary Penalty – A fine may be imposed for failure to provide digital payment options.

❌ Legal Action – Persistent non-compliance may lead to further action under GST laws.

Benefits of Section 31A of GST

1. Promotes Cashless Economy

• Encouraging digital payments helps reduce cash dependency and improves financial transparency.

2. Enhances Tax Compliance

• Digital transactions leave an audit trail, making it easier for authorities to verify GST payments and filings.

3. Increases Customer Convenience

• Providing multiple payment options improves the customer experience and encourages repeat business.

4. Reduces Fraud and Theft

• Electronic payments minimize the risk of cash-related fraud and theft.

5. Improves Business Credibility

• Businesses offering secure and transparent payment options gain customer trust and credibility.

Challenges in Implementing Section 31A

❌ Technical Issues: Internet connectivity and server downtimes may disrupt payment processing.

❌ Customer Awareness: Some customers may be unfamiliar with digital payment methods.

❌ Payment Gateway Fees: Businesses may need to bear transaction fees for certain payment methods.

❌ Compliance Burden: Businesses must ensure that their payment systems are operational at all times.

Frequently Asked Questions (FAQs)

1. Is Section 31A mandatory for all businesses?

No, Section 31A applies only to businesses with an annual turnover exceeding ₹50 crore.

2. What happens if a business fails to provide digital payment options?

Non-compliance can lead to penalties and notices from the GST department.

3. Can a business provide only one mode of digital payment?

Yes, businesses need to offer at least one digital payment mode to comply with Section 31A.

4. Are B2B transactions covered under Section 31A?

No, Section 31A primarily applies to B2C transactions.

Conclusion

Section 31A of the GST Act reflects the Indian government’s commitment to promoting a cashless economy and improving tax compliance. By mandating digital payment options for businesses with a turnover above ₹50 crore, this provision ensures greater financial transparency and customer convenience.

Businesses should adapt to these changes by upgrading their payment infrastructure and training staff on digital payment methods. Compliance with Section 31A not only avoids penalties but also positions businesses as forward-thinking and customer-centric in a rapidly digitizing economy.

If you require assistance on GST services, Manthan Experts can be your trusted advisor. Contact them at info@manthanexperts.com. to discuss your specific needs and explore how their expertise can benefit your business.