Govt Dismisses Reports of GST on UPI Transactions Over ₹2,000 as ‘False and Misleading’
The Finance Ministry clarified that no GST applies to UPI payments as no MDR is charged, reaffirming its commitment to promoting digital transactions.
The Ministry of Finance on Friday refuted media reports suggesting that the government is considering imposing Goods and Services Tax (GST) on UPI transactions exceeding ₹2,000. In a statement, the ministry called such claims “false, misleading, and baseless.”
Clarifying the existing tax framework, the ministry stated that GST is applicable only on service charges such as the Merchant Discount Rate (MDR), which may apply to payments made using specific instruments. However, it emphasized that no MDR is currently levied on UPI transactions.
“Since January 2020, MDR on Person-to-Merchant (P2M) UPI payments has been removed, following a Gazette Notification issued by the Central Board of Direct Taxes (CBDT) on December 30, 2019. As there is no MDR, GST does not apply to UPI payments,” the ministry confirmed.
To encourage the widespread use of UPI, the government has been running an incentive scheme since the financial year 2021–22. The program is aimed at boosting low-value UPI (P2M) transactions, especially benefiting small businesses by offsetting the cost burden of digital payments and fostering financial inclusion.
In FY 2023–24, the government disbursed ₹3,631 crore under this incentive scheme, a significant increase from ₹2,210 crore in the previous year. “These consistent payouts reflect the government’s ongoing support for the UPI ecosystem and digital innovation,” the statement added.
According to the ACI Worldwide Report 2024, India continues to dominate global real-time digital payments, accounting for 49% of all real-time transactions in 2023, solidifying its status as a global leader in digital payment innovation.