Govt rejects reports of GST on UPI transactions above ₹2,000: 'completely false, misleading'

The Ministry of Finance on Friday dismissed reports claiming that the government was considering imposing Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions above ₹2,000 as “completely false and misleading”.

The ministry clarified that no such proposal is under consideration and reiterated its commitment to “promoting digital payments via UPI.”

“The claims that the Government is considering levying GST on UPI transactions over ₹2,000 are completely false, misleading, and without any basis. Currently, there is no such proposal before the Government,” the statement said.

The ministry explained that GST is applicable only on charges such as the Merchant Discount Rate (MDR) related to payments via certain instruments. However, the Central Board of Direct Taxes (CBDT), through a gazette notification issued on December 30, 2019, has removed the MDR on Person-to-Merchant (P2M) UPI transactions effective January 2020.

“Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions,” the Ministry said.

The ministry also highlighted the incentive scheme introduced since FY 2021-22 to promote the adoption of UPI.

"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,” the release said.

Under the incentive scheme, the government has allocated ₹1,389 crore in FY 2021-22, ₹2,210 crore in FY 2022-23, and ₹3,631 crore in FY 2023-24.

“These measures have significantly contributed to India’s robust digital payments ecosystem,” it added.