Finance Ministry Refutes Rumors of GST on High-Value UPI Payments

On Friday, the Ministry of Finance clarified there are no plans of the government to levy Goods and Services Tax (GST) on UPI transactions over Rs 2,000.

"The reports that the government is considering GST on UPI transactions of over Rs 2,000 are totally false, misleading, and baseless. Currently, no such proposal is under consideration," the Finance Ministry stated.

GST is in general imposed on fees like the Merchant Discount Rate (MDR) for payment made via a few modes of payments.

The Central Board of Direct Taxes (CBDT) up to January 2020 exempted the MDR in Person-to-Merchant (P2M) UPI payments through a December 30, 2019, Gazette Notification.

Since there is no MDR charged for UPI payments at present, there is no GST being paid on UPI transactions, clarified the Ministry.

The government also aims to enhance digital payments through UPI. For its encouragement, an Incentive Scheme has been functioning since FY 2021-22. The scheme is geared towards small-value UPI (P2M) transactions so as to cut down the cost of transaction on small merchants and encourage higher usage and innovation of digital payments, the official notification clarified.

The press release stressed that the total incentive payouts under this scheme over the years represent the sustained push of the government towards enabling UPI-based digital payments. Scheme allowances are Rs 1,389 crore for FY2021-22, Rs 2,210 crore for FY2022-23, and Rs 3,631 crore for FY2023-24.

All these schemes have benefited India's digital payments system significantly.

The ACI Worldwide Report 2024 found that India accounted for 49 percent of worldwide real-time transactions in 2023, cementing its position as a global leader in digital payments innovation.

The value of UPI transaction has witnessed tremendous growth, increasing from Rs 21.3 lakh crore in FY 2019-20 to a probable Rs 260.56 lakh crore till March 2025.

Inspiringly, P2M transactions have picked up to Rs 59.3 lakh crore, reflecting the accelerating speed among consumers and merchants growing trust in digital payment facilities, the statement added.