No plans to levy GST on UPI transactions above Rs 2,000, clarifies Finance Ministry

Daijiworld Media Network - New Delhi

New Delhi, April 18: The Finance Ministry on Friday clarified that the government is not considering any proposal to impose Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding Rs 2,000.

“The claims that the government is considering levying Goods and Services Tax (GST) on UPI transactions over Rs 2,000 are completely false, misleading, and without any basis. Currently, there is no such proposal before the Government,” the Ministry stated.

GST is applicable only to specific charges, such as the Merchant Discount Rate (MDR), related to payments made through certain financial instruments.

Effective from January 2020, the Central Board of Direct Taxes (CBDT) eliminated the MDR on Person-to-Merchant (P2M) UPI transactions through a Gazette Notification dated 30 December 2019.

Since MDR is not currently levied on UPI transactions, GST is consequently not applicable either, the Finance Ministry explained.

The government reaffirmed its commitment to promoting digital payments via UPI. In order to sustain and encourage the growth of the UPI ecosystem, an Incentive Scheme has been operational since the financial year 2021–22. This initiative specifically targets low-value P2M UPI transactions, with the aim of supporting small merchants by reducing transaction costs and encouraging greater participation and innovation in the digital payments space.

The ministry highlighted that the cumulative incentive payouts under this scheme underscore the government’s continued dedication to expanding UPI-based transactions. The allocated amounts include Rs 1,389 crore for FY 2021–22, Rs 2,210 crore for FY 2022–23, and Rs 3,631 crore for FY 2023–24.

These efforts have significantly strengthened India’s position in the global digital payments landscape.

According to the ACI Worldwide Report 2024, India accounted for 49% of all real-time digital transactions globally in 2023, reaffirming its position as a global leader in digital payments innovation.

The value of UPI transactions has witnessed exponential growth, increasing from Rs 21.3 lac crore in FY 2019–20 to Rs 260.56 lac crore by March 2025. Among these, P2M transactions alone have reached Rs 59.3 lac crore, reflecting the expanding adoption by merchants and growing consumer trust in digital modes of payment, the statement added.