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The Ministry of Finance has categorically denied recent claims that the government is planning to impose Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions over Rs 2,000. In an official statement released Friday, the ministry stated that such reports are “completely false, misleading, and without any basis.” It clarified that currently, there is no proposal before the government to levy GST on UPI transactions. The clarification came amid circulating rumors regarding potential taxation on digital payments. The Ministry stressed its ongoing support for digital payments and reiterated its commitment to making UPI-based transactions accessible and cost-effective for the public.
No GST on UPI Transactions Due to Zero MDR
GST is only applicable on payment charges, such as the Merchant Discount Rate (MDR), which relates to certain payment instruments. However, effective from January 2020, the Central Board of Direct Taxes (CBDT) eliminated MDR on Person-to-Merchant (P2M) UPI transactions through a Gazette Notification issued on December 30, 2019. As MDR on UPI transactions stands at zero, there is consequently no GST applicable. The Finance Ministry confirmed that UPI payments continue to remain GST-free due to the absence of any service charge or MDR on these transactions.
Government Incentive Scheme Boosts UPI Adoption
To support the rapid adoption of UPI and maintain its momentum, the government has been running an Incentive Scheme since the financial year 2021–22. This scheme specifically targets low-value P2M UPI transactions. It aims to benefit small merchants by reducing transaction costs and encouraging broader participation in digital payments. Allocation under this scheme has steadily increased, with Rs 1,389 crore in FY2021–22, Rs 2,210 crore in FY2022–23, and Rs 3,631 crore in FY2023–24.
India Leads in Global Digital Payment Transactions
The Ministry highlighted that these efforts have significantly strengthened India’s digital payments ecosystem. As per the ACI Worldwide Report 2024, India accounted for 49 percent of global real-time transactions in 2023. UPI transaction values have surged from Rs 21.3 lakh crore in 2019–20 to Rs 260.56 lakh crore by March 2025. Specifically, P2M transactions have reached Rs 59.3 lakh crore, reflecting growing trust and adoption among both consumers and merchants.
(With Inputs From ANI)
