No GST on UPI transactions above Rs 2,000, says Finance Minister

New Delhi: The Central government clarified that it is not considering levying Goods and Services Tax (GST) on UPI transactions exceeding Rs 2,000.

Clarifying reports that stated the government is considering levying GST on UPI transactions exceeding Rs 2,000, the finance ministry has said that these reports are completely false, misleading, and without any basis. "Currently, there is no such proposal before the government," the ministry said in a statement.

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) has eliminated the Merchant Discount Rate (MDR) on person-to-merchant (P2M) Unified Payments Interface (UPI) transactions. "Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions," the ministry said.

UPI transaction values have seen an exponential increase, growing from Rs 21.3 lakh crore in FY 2019-20 to Rs 260.56 lakh crore by March 2025.

The ministry also said that the government remains committed to promoting digital payments through UPI. To support and sustain the growth of UPI, an incentive scheme has been operational from FY2021- 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.

In 2023-24, the government paid Rs 3,631 crore under the scheme, up from Rs 2,210 crore in 2022-23. "The total incentive payouts under this scheme over the years reflect the government's sustained commitment to promoting UPI-based digital payments," the ministry noted.