No GST on UPI Transactions: Centre Clarifies Amid False Claims
Table of Contents:
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Centre Clarifies No GST on UPI Transactions
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What is Merchant Discount Rate (MDR) and How Does it Affect GST?
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The Government’s Support for Digital Payments and UPI
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The Growth of UPI Transactions in India
Centre Clarifies No GST on UPI Transactions
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that claims circulating on social media regarding the imposition of GST on UPI transactions exceeding Rs 2,000 are entirely unfounded and inaccurate. The Ministry of Finance, through an official post on the microblogging platform X (formerly Twitter), categorically denied these reports, calling them false, misleading, and without any basis.
The claims about imposing GST on UPI transactions have stirred significant discussions, especially among small business owners and individual users who rely heavily on UPI for their daily transactions. In response, the Centre emphasized that no such proposal is under consideration. Furthermore, the Ministry clarified that no GST would be levied on UPI transactions due to the absence of any Merchant Discount Rate (MDR) charges for such transactions.
What is Merchant Discount Rate (MDR) and How Does it Affect GST?
As per the clarification, the GST on payments is generally levied on charges such as the Merchant Discount Rate (MDR), which applies to payments made using specific instruments. However, in January 2020, the Central Board of Direct Taxes (CBDT) issued a notification officially abolishing the MDR for Person-to-Merchant (P2M) UPI transactions. Since no MDR is currently charged on UPI transactions, GST does not apply to these payments.
The government has also made it clear that there is no official proposal to introduce any charges or taxes related to UPI transactions, further reassuring the public. UPI’s growth has been significant, particularly in rural areas where it has eliminated the need for physical cash and made digital payments more accessible.
The Government’s Support for Digital Payments and UPI
Contrary to the false claims, the government has been consistently supporting and incentivizing digital payments, including UPI, to ensure wider adoption and innovation. One of the key initiatives in this regard is the UPI Incentive Scheme, which was introduced in the Financial Year 2021-22. The scheme provides significant support to cover transaction costs for merchants, especially in the case of low-value UPI transactions.
Here is a breakdown of the financial support given under the UPI Incentive Scheme:
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FY 2021-22: Rs 1,389 crore
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FY 2022-23: Rs 2,210 crore
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FY 2023-24: Rs 3,631 crore
These payouts help merchants adopt UPI for their transactions, further boosting digital payment growth across India.
The Growth of UPI Transactions in India
India’s UPI platform has made a mark globally by setting new benchmarks for scale, adoption, and impact in the world of real-time digital payments. According to reports from the National Payments Corporation of India (NPCI), UPI transactions reached an all-time high in March 2025, with a total value of Rs 24.77 lakh crore, a 12.7% increase from the previous month’s Rs 21.96 lakh crore.
The growth of UPI is not just seen in transaction volume but also in value. UPI transactions surged significantly from Rs 21.3 lakh crore in FY 2019-20 to a staggering Rs 260.56 lakh crore in FY 2024-25. A large portion of this growth comes from Person-to-Merchant (P2M) transactions, which amounted to Rs 59.3 lakh crore, signifying the growing acceptance of UPI among small businesses and merchants.
The growth trends demonstrate that UPI is quickly becoming a crucial part of everyday life for Indians, with a particular rise in adoption for business and retail transactions. The ease of use and the widespread availability of UPI payment options have helped build consumer trust and contributed to the platform’s rapid expansion.
As India’s leader in real-time payments, UPI now accounts for almost half of the world’s real-time transactions, cementing the country’s position as the global leader in digital payments.
Conclusion: No GST on UPI Transactions
In conclusion, the government has made it clear that there will be no GST levied on UPI transactions, including those over Rs 2,000. This reassurance is crucial for individual users, small businesses, and anyone relying on UPI for transactions. The government continues to support the growth of UPI as part of its broader initiative to encourage digital payments in the country.
For more information on digital payment policies, visit NPCI’s official website. Additionally, you can read more about UPI’s impact in our previous article on UPI’s role in digital payments.
