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Tokenisation, GST rules to come into effect from Jan 1; all you need to know

Tokenisation, GST rules to come into effect from Jan 1; all you need to know

The way Indians transact for goods and services and the way business file their taxes is going to witness a sea change from January 1, 2022.

From tokenisation of debit and cards to extra fee on ATM transactions beyond free permissible limit, here are some changes that will come into effect from January next year From tokenisation of debit and cards to extra fee on ATM transactions beyond free permissible limit, here are some changes that will come into effect from January next year

The way Indians use their credit/debit cards and transact at ATMs is going to change from January 1, 2022. Besides this, employees will also not be able to avail EPF benefits if they haven’t appointed a nominee and businesses cannot get away in case of a mismatch between two GST forms – GSTR-1 and GSTR-3B. From tokenisation of debit and cards to extra fee on ATM transactions beyond free permissible limit, here are some changes that will come into effect from January next year:

Card tokenisation

Indians’ usage of credit and debit cards is going to change from January next year due to the new regulations vis-à-vis tokenisation of credit and debit cards. Companies like Netflix, Amazon, Zomato and payment aggregators like Paytm, Google Pay will no longer be able to store the card information of their users.

The Reserve Bank of India (RBI) has asked all merchants and payment gateways to delete customer data available at their end to make online transactions more secure. Tokenisation can only be performed by the list of card networks authorised by the RBI to do so. Tokenisation is allowed through mobile phones and/or tablets for all use cases/channels like contactless card transactions, payments using QR codes, apps, etc., as per an RBI FAQ on the same.

Tokenisation is the replacement of actual card details with an alternate code or token. Token shall be unique for each combination of cards, token requestor and device. Token requestor is the entity that accepts request from the customer for tokenisation of a card and passes it on to the card network to issue a corresponding token.

The central bank aims to extend the device-based tokenisation framework referred to Card-on-File Tokenisation (CoFT) besides permitting card issuers to offer card tokenisation services as Token Service Providers (TSPs). RBI announced enhancements to the existing framework on tokenisation of card transactions.

Measures taken for card tokenisation are as follows:

  1. Extend the device-based tokenisation framework referred to CoF Tokenisation (CoFT) as well
  2. Permit card issuers to offer card tokenisation services like Token Service Providers (TSPs)
  3. Facility of tokenisation shall be offered by the TSPs only for the cards issued by/affiliated to them
  4. Ability to tokenise and de-tokenise card data shall be with the same TSPs
  5. Tokenisation of card data shall be done with explicit customer consent requiring Additional Factor of Authentication (AFA) validation by card issuer

Online debit/credit card transactions comprise 16-digit card number, card expiry date, CVV and an OTP or transaction PIN. For successful online card transactions, these details need to be entered accurately to merchants or companies.

The RBI has, however, made it clear that payments merchants and companies have to expunge such information from their databases and replace it with tokenisation. “With effect from January 1, 2022, no entity in the card transaction/payment chain, other than the card issuers and/or card networks, shall store the actual card data. Any such data stored previously shall be purged,” the RBI notification dated September 30 read.

It further read that payment system providers and payment system participants can store limited data (last four digits of the actual card number and card issuer’s name) to track transactions and/or for reconciliation.

This will, however, not be mandatory for customers. In case a user wants to get his/her card tokenised, they can get their card tokenised with a merchant or service provider by initiating a request on the app provided by the token requestor. The token requestor will then forward the request to the card network, which, with the consent of the card issuer, will issue a token corresponding to the combination of the card, the token requestor and the device.

For any online payment, a cardholder needs to give consent to a particular merchant or company via additional factor authentication (AFA) for tokenisation from January 1, 2022. Post this, the merchant will send a request for tokenisation to the card network.

The card network will then create a token that acts as a replacement for the 16-digit card number and send it back to the merchant. This token will be saved by the merchant for future transactions instead of card details. An individual will have to enter the CVV and the OTP like before for approval of transactions following tokenisation. Tokenisation process has to be done separately for different merchants.

New GST rule from January 1, 2022

This, however, is not the only change that will come into effect from January 1, 2022. GST officials can initiate recovery action against errant businesses that show higher sales compared to their monthly return as per GSTR-1 but under-report it while tax payment in GSTR-3B.

Government had brought in this change as part of the Finance Act, passed by the Parliament this year. Central Board of Indirect Taxes and Customs (CBIC) notified that this provision under the GST law will come into effect from January 1, 2022.

The move is aimed at nipping the menace of fake billing in the bud wherein sellers show higher sales in GSTR-1 so that the purchaser can claim input tax credit (ITC) but report lesser sales in GSTR-3B to minimise tax liability. As of present, it is important for businesses to ensure that the GSTR-1 and GSTR-3B forms match with each other and no differences should be permitted in the same irrespective of the reasons.

Employees Provident Fund benefits to stop without nominee

The Employees’ Provident Fund Organisation (EPFO) sent out a notice saying that if accountholders do not appoint a nominee, they will no longer be able to avail the benefits of the Employees’ Provident Fund (EPF). This will come into effect from January 1, 2022. The EPFO has also increased the maximum assurance benefit under the Employees Deposit Linked Insurance (EDLI) scheme upto Rs 7 lakh in June this year.

The scheme has been made mandatory for all accountholders as if the main accountholder dies due to natural reasons or accident or illness, the nominee appointed will get an amount of Rs 7 lakh.

Steps to register EPF nominees online

Step 1: Visit the official EPFO site
Step 2: Go to the ‘Services’ option
Step 3: Click on the ‘For Employees’ section
Step 4: Tap on the ‘Member UAN/Online service’ option
Step 5: You will be redirected to the e-SEWA portal. Key in your credentials
Step 6: Click on the ‘Manage’ tab. Post this, hit ‘Yes’ to update the family declaration
Step 7: Tap on ‘Add Family Details’
Step 8: Click on ‘Nomination Details’ and enter the total amount of the share
Step 9: Tap on ‘Save the EPF Nomination’
Step 10: Generate one-time password by hitting ‘E-Sign’ option
Step 11: Enter the OTP number and the process of registering is complete

Extra fee for ATM transactions beyond permissible limit

The Reserve Bank of India (RBI) permitted banks to hike charges for cash and non-cash ATM transactions beyond free monthly permissible limit in June this year. Customers will have to pay Rs 21 instead of Rs 20 if they exceed the monthly limit of free transactions with effect from January 1, 2022.

Customers will be eligible for five free transactions – financial and non-financial every month from the ATMs of their own banks. They would also be able to do three free transactions from other bank ATMs in metros and five in non-metros.
"To compensate the banks for the higher interchange fee and given the general escalation in costs, they are allowed to increase the customer charges to Rs 21 per transaction. This increase shall be effective from January 1, 2022," the RBI said in a circular.

Also read: New GST rule to be implemented from Jan 1, 2022: check details