No GST on UPI transactions over 2000,clarifies government

The government on Friday clarifies that it is not mulling to levy GST on UPI transactions above 2000. Clarifying on reports which said that the government is considering levying Goods and Services Tax on UPI transactions over 2000 the Finance Ministry said they 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, relating to payments made using certain instruments.

Effective January 2020 the Central board of Direct Taxes has removed the MDR on person-to merchant UPI transactions.

Since currently no MDR is charged on UPI transactions there is consequently no GST applicable to these transactions the Ministry said. UPI transactions values have seen an exponential increase growing from 213 lakh crore in FY 2019-20 to 260.56 lakh crore by March 2025.

The Ministry also said the government remains committed to promoting digital payments via UPI.

To support and sustain the growth of UPI, an incentive scheme has been operational from FYI2021-22. This scheme specifically targets low-value UPI transactions benefiting small merchants by alleviating transaction costs and promoting wider participants and innovation in digital payments.

In 2023-24 the government paid 3,631 crore under the scheme, up from 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.