In recent days, rumors have been circulating that the Indian government plans to impose Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding Rs 2,000. These reports sparked concern among millions of users and merchants who rely heavily on UPI for digital payments. However, the government has officially clarified that these claims are completely false, misleading, and without any basis.
What the Government Says
The Ministry of Finance issued a clear statement denying any proposal to levy GST on UPI transactions above Rs 2,000. It emphasized that currently, no such plan exists and that the rumors are baseless.
GST is typically levied on charges associated with payment transactions, such as the Merchant Discount Rate (MDR). MDR is a fee that merchants pay to banks or payment service providers for processing transactions. However, since January 2020, the Central Board of Direct Taxes (CBDT) has removed the MDR on person-to-merchant (P2M) UPI transactions through an official Gazette Notification. Because no MDR is charged on UPI transactions, there is consequently no GST applicable to these payments.
The Growth of UPI and the Government’s Support
UPI has become a cornerstone of India’s digital payments ecosystem. Transaction values have soared from Rs 21.3 lakh crore in the financial year 2019-20 to an estimated Rs 260.56 lakh crore by March 2025. Specifically, P2M transactions have reached Rs 59.3 lakh crore, reflecting growing merchant adoption and consumer confidence in digital payments.
To further encourage this growth, the government has been running an incentive scheme since 2021-22 aimed at low-value UPI transactions. This scheme benefits small merchants by reducing transaction costs, thereby promoting wider participation and innovation in digital payments. The total incentive payouts have increased over the years:
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FY 2021-22: Rs 1,389 crore
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FY 2022-23: Rs 2,210 crore
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FY 2023-24: Rs 3,631 crore
These efforts underscore the government’s commitment to fostering a robust and inclusive digital payments environment.
Why This Clarification Matters
The misinformation about GST on UPI transactions above Rs 2,000 could have created unnecessary fear among users and merchants, potentially slowing down the adoption of digital payments. By clarifying the facts, the government reassures stakeholders that UPI transactions remain free from additional tax burdens, encouraging continued growth and innovation.
India’s leadership in digital payments is also reflected globally. According to the ACI Worldwide Report 2024, India accounted for 49% of global real-time transactions in 2023, showcasing its position as a global leader in digital payments innovation.
While some industry voices have called for introducing MDR charges on large UPI transactions to sustain the payment ecosystem financially, the government’s current stance prioritizes promoting digital payments without imposing extra taxes on users. This approach supports financial inclusion and helps small merchants thrive by keeping transaction costs low.
However, the debate around MDR and GST on digital payments is ongoing, reflecting the challenge of balancing revenue needs with the goal of widespread digital adoption. For now, users can be confident that their UPI transactions, regardless of the amount, will not attract GST.
In summary, the government has firmly denied any plans to levy GST on UPI transactions above Rs 2,000. With no MDR charged on these transactions, GST does not apply. The government continues to support digital payments through incentives and policies that encourage growth and inclusion, helping India maintain its leadership in the global digital payments landscape. This clarification helps dispel confusion and supports the continued trust and expansion of UPI usage across the country.
With inputs from agencies
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