No GST on UPI transactions over ₹2,000, clarifies government
Finance Ministry Denies GST on UPI Transactions Over ₹2,000
The Finance Ministry has firmly refuted reports suggesting the government is considering imposing Goods and Services Tax (GST) on UPI transactions exceeding ₹2,000. In a statement released on Friday, April 18, 2025, the Ministry labelled these reports as “completely false, misleading, and without any basis.”
Let’s dive into the details.
No GST on UPI – What the Ministry Says
Addressing the buzz around potential GST implications on UPI transactions, the Finance Ministry stated unequivocally, “Currently, there is no such proposal before the government.”
GST and Payment Charges: The Real Deal
It’s true that GST is levied on certain charges related to payments made through specific instruments, such as the Merchant Discount Rate (MDR). However…
The MDR Factor
Since January 2020, the Central Board of Direct Taxes (CBDT) has eliminated the MDR on person-to-merchant (P2M) UPI transactions.
“Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions,” the Ministry clarified.
UPI’s Explosive Growth
The value of UPI transactions has seen a massive surge in recent years, skyrocketing from ₹21.3 lakh crore in FY 2019-20 to ₹260.56 lakh crore by March 2025.
Government’s Commitment to Digital Payments
The Ministry reiterated the government’s dedication to promoting digital payments via UPI. To support this growth, an incentive scheme has been in place since FY2021-22.
Incentivizing Low-Value Transactions
This scheme specifically targets low-value UPI (P2M) transactions, aiming to help small merchants by reducing transaction costs and encouraging broader participation and innovation in the digital payments space.
Incentive Payouts: A Clear Signal
The government’s financial commitment to this scheme is substantial. In 2023-24, ₹3,631 crore was paid out, a significant increase from the ₹2,210 crore in 2022-23.
“The total incentive payouts under this scheme over the years reflect the government’s sustained commitment to promoting UPI-based digital payments,” the Ministry emphasized.