GST on UPI transactions over Rs 2,000: Govt issues clarification, terms reports 'false, misleading'

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

The Ministry of Finance on Friday issued a clarification on the reports that the government is considering levying Goods and Services Tax (GST) on UPI transactions over Rs 2,000. Clarifying on reports, which said that the government is considering levying Goods and Services Tax (GST) on UPI transactions over Rs 2,000, the finance ministry said they are completely false, misleading, and without any basis.

The Finance Ministry further said that 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 through the Gazette Notification dated 30th December 2019.""Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions," according to the Ministry of Finance statement.

It further stated that to support and sustain the growth of UPI, an Incentive Scheme has been operational from 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.

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. Specifically, P2M transactions have reached Rs 59.3 lakh crore, reflecting growing merchant adoption and consumer confidence in digital payment methods.

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.

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.