No GST on UPI transactions over Rs 2000, clarifies Ministry of Finance

The claims that the government is considering levying Goods and Services Tax (GST) on UPI transactions over Rs 2,000 are completely false, misleading, and without any basis, said the Ministry of Finance in a statement Friday.

Currently, there is no such proposal before the government, the Finance Ministry clarified.

GST is levied on charges, such as the Merchant Discount Rate (MDR), relating to payments made using certain instruments.

Effective January 2020, the Central Board of Direct Taxes (CBDT) removed the Merchant Discount Rate (MDR) on Person-to-Merchant (P2M) UPI transactions through a Gazette Notification dated December 30, 2019.

Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions.

The government remains committed to promoting digital payments via UPI, the Finance Ministry said.

To support and sustain the growth of UPI, an Incentive Scheme has been operational from 2021-22.

This scheme specifically targets low-value UPI (P2M) transactions, benefiting small merchants by alleviating transaction costs and promoting wider participation and innovation in digital payments.

The total incentive payouts under this scheme over the years reflect the Government’s sustained commitment to promoting UPI-based digital payments.

Allocation under the scheme over the years has been: FY2021-22: Rs 1,389 crore; FY2022-23: Rs 2,210 crore; and FY2023-24: Rs 3,631 crore.

“These measures have significantly contributed to India’s robust digital payments ecosystem,” the ministry said.

According to the ACI Worldwide Report 2024, India accounted for 49 per cent of global real-time transactions in 2023, reaffirming its position as a global leader in digital payments innovation.

UPI transaction values have seen an exponential increase, growing from Rs 21.3 lakh crore in 2019-20 to Rs 260.56 lakh crore by March 2025. Specifically, P2M transactions have reached Rs 59.3 lakh crore, reflecting growing merchant adoption and consumer confidence in digital payment methods.