UPI Remains GST-Free! Govt. clears the Air on Rumours indicating Tax Levy on Transactions Above ₹2000
The news comes as a major relief to the general public and merchants given the immense popularity and usage of UPI Applications
Great news for digital payment users! The Finance Ministry has officially dismissed swirling rumors about imposing GST on UPI transactions above ₹2000 as "completely false and misleading." In a late evening press release, the government confirmed there's currently no such proposal under consideration, putting to rest concerns that had been worrying millions of UPI users...
Great news for digital payment users! The Finance Ministry has officially dismissed swirling rumors about imposing GST on UPI transactions above ₹2000 as "completely false and misleading." In a late evening press release, the government confirmed there's currently no such proposal under consideration, putting to rest concerns that had been worrying millions of UPI users across India.
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At the heart of the confusion lies the issue of Merchant Discount Rate (MDR) - a small fee typically charged by banks and payment aggregators for processing transactions. The press release clarified that GST is applicable only on MDR and not on the UPI transactions themselves.
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Importantly, effective January 2020, the Central Board of Direct Taxes (CBDT) scrapped the MDR on Person-to-Merchant (P2M) UPI transactions through a Gazette Notification. Since there's no MDR on these UPI payments, it naturally follows that there’s no GST either.
That being said, the GST Council has previously toyed with the idea of taxing UPI transactions. Remember last September when they debated slapping an 18% GST on sub-₹2000 transactions through payment gateways? The proposal was sent back to the Fitment Committee for further study, indicating that the idea isn’t completely off the government's radar. Payment gateways currently charge 0.5%-2% on such transactions, which could theoretically attract GST if the rules change.
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Meanwhile, the Government is actively looking to implement newer methods to foster UPI adoption, with a particular interest in small merchants. The Government has been running an Incentive Scheme since FY 2021-22, offering payouts that offset the cost of UPI infrastructure. The payouts under the scheme have only grown, from ₹1,389 crore in Financial Year (F.Y.) 21-22 to ₹3,631 crore in F.Y. 23-24.
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This strategic backing has directly contributed to India's digital payments boom. According to the ACI Worldwide Report 2024, India accounted for a staggering 49% of global real-time digital transactions in 2023. UPI transaction values alone have surged from ₹21.3 lakh crore in FY19-20 to ₹260.56 lakh crore as of March 2025, with ₹59.3 lakh crore in P2M transactions.
And so, you may continue scanning those QR codes for chai, chaat, or concert tickets, without the worry of GST on the UPI transactions.
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