No GST on UPI Transactions Over ₹2,000 – Government Clarifies

In recent times, there have been claims circulating that the Government of India is considering levying GST on UPI transactions over ₹2,000. These claims have caused confusion and concern among users and merchants who rely heavily on UPI for digital payments. However, the Ministry of Finance has officially clarified that these claims are completely false and without any basis. This blog post will delve into the details of the government’s clarification and the current status of GST on UPI transactions.

No GST on UPI Transactions Over ₹2,000

The Ministry of Finance, through a press release dated April 18, 2025, has categorically stated that there is no proposal to levy GST on UPI transactions over ₹2,000. The claims suggesting otherwise are misleading and unfounded. Currently, there is no GST applicable to UPI transactions, as there are no charges such as the Merchant Discount Rate (MDR) on these transactions.

Background on MDR and GST

Effective January 2020, the Central Board of Direct Taxes (CBDT) removed the MDR on Person-to-Merchant (P2M) UPI transactions. This decision was formalized through a Gazette Notification dated December 30, 2019. Since no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions. This move was aimed at promoting digital payments and reducing the cost burden on merchants and consumers.

Government’s Commitment to Digital Payments

The Government of India remains committed to promoting digital payments via UPI. To support and sustain the growth of UPI, an Incentive Scheme has been operational since FY 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.

Incentive Scheme Allocation

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

1. FY 2021-22: ₹1,389 crore
2. FY 2022-23: ₹2,210 crore
3. FY 2023-24: ₹3,631 crore

These measures have significantly contributed to India’s robust digital payments ecosystem.

India’s Leadership in Digital Payments

According to the ACI Worldwide Report 2024, India accounted for 49% 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 ₹21.3 lakh crore in FY 2019-20 to ₹260.56 lakh crore by March 2025. Specifically, P2M transactions have reached ₹59.3 lakh crore, reflecting growing merchant adoption and consumer confidence in digital payment methods.

Conclusion

The Government of India has made it clear that there is no GST on UPI transactions over ₹2,000. The removal of MDR on UPI transactions and the implementation of the Incentive Scheme have played a crucial role in promoting digital payments and supporting small merchants. As India continues to lead in digital payments innovation, users and merchants can remain confident in the government’s commitment to fostering a seamless and cost-effective digital payments ecosystem.