The Indian government has stated that it is not planning to impose Goods and Services Tax (GST) on UPI transactions exceeding Rs 2,000. This clarification follows media reports suggesting that the government was contemplating the introduction of GST on such transactions.
The Finance Ministry stated, “The claims…are completely false, misleading, and without any basis. Currently, there is no such proposal before the government.”
GST is imposed on charges like the merchant discount rate (MDR), relevant to the payments made using specific instruments, the ministry cited.
“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,” the ministry expressed.
Concentrated on Promoting UPI
The government mentioned that it remained devoted to promoting digital payments via UPI. An incentive scheme has been established since FY 2021–22 to support and sustain the growth of UPI.
The same scheme targets low-value UPI (P2M) transactions, providing benefits to small merchants by lessening the transaction costs and motivating wider participation and innovation in digital payments.
Read Also: Madras HC: GST Registration and Tax Payment After Inspection Are Not Voluntary Acts
The government’s continued support for UPI-based digital payments is evidenced by the total incentive awards made under the program over the years. FY 2021–2022 received Rs 1,389 crore, FY 2022–2023 received Rs 2,210 crore, and FY 2023–2024 received Rs 3,631 crore.
Surging Growth in Digital Payments
In 2023, India accounted for 49% of global real-time transactions, reaffirming its position as a global leader in digital payments innovation as per the ACI Worldwide Report 2024.
The value of UPI transactions has seen significant growth, rising from ₹21.3 lakh crore in the fiscal year 2019–20 to ₹260.56 lakh crore by March 2025. In particular, Person-to-Merchant (P2M) transactions have reached ₹59.3 lakh crore, reflecting increased merchant adoption and growing consumer confidence in digital payment methods.
