The Ministry of Finance has officially dismissed circulating rumors suggesting that the government plans to impose Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding ₹2,000. In a statement released on April 18, the ministry labeled such claims as “completely false, misleading, and without any basis.”
No GST Without MDR
The government’s clarification emphasizes that GST is levied on charges like the Merchant Discount Rate (MDR), which pertains to fees merchants pay to banks or payment service providers for processing transactions. Since January 2020, the Central Board of Direct Taxes (CBDT) has eliminated MDR on Person-to-Merchant (P2M) UPI transactions through a Gazette Notification dated December 30, 2019. Consequently, with no MDR applied to these transactions, there is no GST applicable either.
Government’s Commitment to Digital Payments
Contrary to the unfounded claims, the government has been actively promoting digital payments, particularly through UPI. To encourage adoption, especially among small merchants, an incentive scheme has been operational since the fiscal year 2021-22. This scheme aims to alleviate transaction costs and promote wider participation in digital payments. The allocations under this scheme have been:
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FY 2021-22: ₹1,389 crore
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FY 2022-23: ₹2,210 crore
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FY 2023-24: ₹3,631 crore
These measures underscore the government’s sustained commitment to fostering a robust digital payments ecosystem.
India’s Leadership in Digital Transactions
India continues to lead globally in real-time digital transactions. According to the ACI Worldwide Report 2024, the country accounted for 49% of global real-time transactions in 2023. UPI transaction values have seen exponential growth, rising 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.
Public Reassurance
The Ministry of Finance’s prompt clarification aims to reassure the public and stakeholders that there are no plans to levy GST on UPI transactions, regardless of the amount. This move is intended to dispel misinformation and maintain trust in the nation’s digital payment infrastructure.