No GST on UPI Transactions Over Rs 2,000: Government Dismisses Claims
The Ministry of Finance has categorically denied claims suggesting that Goods and Services Tax (GST) may be imposed on UPI transactions exceeding Rs 2,000. Responding to reports in circulation, the ministry emphasized that such claims are “false, misleading, and without any basis.”
- The clarification comes amid rising public concern about potential taxation on digital transactions.
- Misinterpretation of GST applicability seems to have triggered the speculation.
Understanding GST Applicability on Digital Payments
The government clarified that GST is applicable only to specific charges, such as the Merchant Discount Rate (MDR), associated with certain types of payment instruments.
- MDR is a fee paid by merchants to banks for accepting digital payments.
- It is not imposed on UPI transactions where no MDR is charged.
A significant policy shift occurred in January 2020 when the Central Board of Direct Taxes (CBDT) removed MDR on Person-to-Merchant (P2M) UPI payments via a Gazette Notification dated December 30, 2019.
- As a result, no MDR currently applies to UPI P2M transactions, and therefore, no GST is levied on them either.
- This policy helps keep digital payments free for merchants, particularly small businesses.
Government Support Through Incentive Schemes
To further boost the use of UPI, the government launched an Incentive Scheme in FY 2021-22, focused specifically on low-value P2M UPI transactions.
- This scheme supports small merchants by reducing transaction costs.
- It also promotes greater innovation and inclusivity in the digital payment ecosystem.
The government’s financial commitment has grown over the years:
- In 2022-23, Rs 2,210 crore was disbursed under this scheme.
- The payout rose to Rs 3,631 crore in 2023-24, indicating sustained support for digital payment adoption.
Exponential Growth in UPI Usage
The value of UPI transactions has skyrocketed in recent years, reaching Rs 260.56 lakh crore by March 2025, up from Rs 21.3 lakh crore in FY 2019-20.
- P2M transactions alone have hit Rs 59.3 lakh crore, underlining strong merchant adoption.
- This surge reflects growing consumer trust in secure, real-time, cashless payment systems.
India’s Global Leadership in Digital Transactions
According to the ACI Worldwide Report 2024, India accounted for 49% of global real-time transactions in 2023, maintaining its status as a world leader in digital payment innovations.
- This highlights the effectiveness of government policies aimed at scaling digital finance infrastructure.
- It also demonstrates India’s role in setting global benchmarks for real-time digital payment systems.
In summary, the government’s clarification reaffirms that no GST is being imposed on UPI transactions over Rs 2,000, and its focus remains on expanding accessible, cost-effective digital payment solutions for all.
