The government has issued clarification regarding speculations that Goods and Services Tax (GST) will be applicable on UPI transactions exceeding Rs 2,000. In a PIB release, the Ministry of Finance stated on Friday (April 18, 2025) that the claims that the government is considering levying GST on UPI transactions above Rs 2,000 are entirely false, misleading, and without any basis.
“Currently, there is no such proposal before the government,” said the Ministry. 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 removed the MDR on person-to-merchant (P2M) UPI transactions.
“Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions,” said the Ministry.
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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 the government remains committed to promoting digital payments via UPI.
An incentive scheme has been operational from FY2021-22 to support and sustain the growth of UPI. 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,” noted the Ministry.
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