New Delhi: The government has dismissed claims suggesting that UPI payments above ₹2,000 would attract Goods and Services Tax (GST), clarifying that there is no such proposal under consideration. The Finance Ministry issued the clarification following a surge in social media posts and news reports spreading misinformation about potential GST levies on high-value digital payments.
“There is currently no proposal to levy GST on UPI transactions, regardless of the transaction value,” the Ministry said, adding that the GST framework only applies to service charges like the Merchant Discount Rate (MDR). However, MDR has not been applicable to person-to-merchant UPI transactions since January 2020, following a directive by the Central Board of Direct Taxes (CBDT). This effectively ensures that users and merchants face no GST burden on UPI payments.
To encourage digital transactions further, the government had introduced an incentive scheme in the financial year 2021-22, aimed at covering costs associated with low-value UPI transactions. The scheme's budgetary allocation rose significantly, with payouts growing from ₹1,389 crore in FY 2021-22 to ₹3,631 crore in FY 2023-24.
UPI has seen exponential growth in both volume and value over the past five years. Transaction values jumped from ₹21.3 lakh crore in FY 2019-20 to over ₹260 lakh crore by March 2025. Payments made to merchants alone accounted for ₹59.3 lakh crore during this period.
India has also become the largest user of real-time digital payments globally, handling 49% of all such transactions in 2023.
The clarification is expected to reassure both users and merchants as the country continues to adopt digital payments at scale, with UPI remaining a key driver in India’s cashless economy initiative.
BI Bureau
