Will GST Apply to UPI Payments Above ₹2,000? Government Clarifies

New Delhi (The Uttam Hindu): The Finance Ministry has made it clear that the government is not considering any proposal to impose Goods and Services Tax (GST) on UPI transactions of more than Rs 2,000. The Finance Ministry said, "The claim that the government is considering imposing GST on UPI transactions of more than Rs 2,000 is completely false, misleading and baseless. At present, the government has no such proposal."

It is levied on charges such as Merchant Discount Rate (MDR) associated with payments made using a particular instrument. The Central Board of Direct Taxes (CBDT) has removed MDR from Person-to-Merchant (P2M) UPI transactions through a Gazette notification dated December 30, 2019. This decision of CBDT is effective from January 2020. The ministry has said that currently MDR is not levied on UPI transactions, hence GST is not applicable on these transactions in any way. The government is committed to promoting digital payments through UPI. To support and sustain the growth of UPI, an incentive scheme has been introduced from FY 2021-22.

The official statement states that the scheme specifically targets low-value UPI (P2M) transactions. The scheme benefits small merchants by reducing transaction costs as well as promoting participation and innovation in digital payments. Allocations under the scheme in the past few years 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 measures have contributed significantly to India's strong digital payment ecosystem. According to the ACI Worldwide Report 2024, India's share in global real-time transactions in 2023 was 49 percent, showing the country's strong position as a global leader in digital payment innovation. UPI transaction value has registered rapid growth, rising from Rs 21.3 lakh crore in FY 2019-20 to Rs 260.56 lakh crore by March 2025. Notably, P2M transactions have reached Rs 59.3 lakh crore, reflecting growing merchant adoption and consumer confidence in digital payment methods, the statement said.