Government Clarifies: No GST on UPI Transactions Above ₹2,000
Amid widespread speculation and circulating reports suggesting that the Indian government plans to levy Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding ₹2,000, the Ministry of Finance has issued an official statement categorically denying such claims. The ministry emphasized that these reports are “completely false, misleading, and without any basis.”
Understanding the Context
Recent media reports and social media discussions have raised concerns about a potential 18% GST on UPI transactions above ₹2,000. These claims have caused confusion among consumers and merchants alike, prompting the government to address the issue directly.
Official Government Position
In a press release, the Ministry of Finance clarified:
“Currently, there is no such proposal before the government. GST is levied on charges, such as the Merchant Discount Rate (MDR), relating to payments made using certain instruments. Effective January 2020, the Central Board of Direct Taxes (CBDT) has removed the MDR on Person-to-Merchant (P2M) UPI transactions through the Gazette Notification dated 30th December 2019. Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions.”
This statement reaffirms that UPI transactions remain exempt from GST, as there are no associated charges like MDR that would attract such a tax.
UPI’s Growth and Government Support
The UPI system has witnessed exponential growth, with transaction values soaring from ₹21.3 lakh crore in FY 2019-20 to ₹260.56 lakh crore by March 2025. Specifically, Person-to-Merchant (P2M) transactions have reached ₹59.3 lakh crore, indicating a significant shift towards digital payments in the retail sector.
To further promote digital transactions, the government has implemented an Incentive Scheme since FY 2021-22, targeting low-value UPI (P2M) transactions. This initiative benefits small merchants by alleviating transaction costs and encouraging broader adoption of digital payment methods. The scheme’s financial allocations have increased over the years:
- FY 2021-22: ₹1,389 crore
- FY 2022-23: ₹2,210 crore
- FY 2023-24: ₹3,631 crore
These measures underscore the government’s commitment to fostering a cashless economy and supporting the digital payments ecosystem.
Clarifying the Misconceptions
The confusion surrounding GST on UPI transactions appears to stem from misinterpretations of discussions within the GST Council. While there have been deliberations about applying GST to service charges collected by payment aggregators for UPI transactions, no concrete proposals have been made regarding taxing the transactions themselves. The government has reiterated that UPI transactions remain completely tax-free for users, and any future changes would involve thorough consultations with stakeholders.
Conclusion
The Ministry of Finance’s clarification provides much-needed reassurance to consumers and merchants who rely on UPI for seamless, cost-free transactions. As of now, there is no GST applicable to UPI transactions, regardless of the amount. The government’s focus remains on promoting digital payments and ensuring that the UPI system continues to serve as an efficient and accessible platform for all.
