No GST on UPI Transactions Over ₹2,000: Government Dismisses Rumors

In a cat­e­gor­i­cal rebut­tal to recent spec­u­la­tion, the Gov­ern­ment has firm­ly denied any pro­pos­al to impose Goods and Ser­vices Tax (GST) on Uni­fied Pay­ments Inter­face (UPI) trans­ac­tions exceed­ing ₹2,000. The clar­i­fi­ca­tion comes amid wide­spread cir­cu­la­tion of mis­lead­ing claims sug­gest­ing poten­tial tax­a­tion on high-val­ue dig­i­tal trans­ac­tions through UPI.

Describ­ing the rumors as “com­plete­ly false, mis­lead­ing, and with­out any basis,” the Gov­ern­ment reit­er­at­ed its long­stand­ing com­mit­ment to pro­mot­ing and expand­ing the dig­i­tal pay­ments ecosys­tem in India. The Min­istry empha­sized that no such GST pro­pos­al is under con­sid­er­a­tion and affirmed the con­tin­ued zero-MDR (Mer­chant Dis­count Rate) pol­i­cy on UPI-based Per­son-to-Mer­chant (P2M) transactions.

No MDR, No GST – The Facts

Since Jan­u­ary 2020, UPI trans­ac­tions between indi­vid­u­als and mer­chants have not attract­ed any MDR charges, thanks to a pol­i­cy deci­sion out­lined in a Gazette Noti­fi­ca­tion issued by the Cen­tral Board of Direct Tax­es (CBDT) on Decem­ber 30, 2019. As GST is only applic­a­ble to ser­vices for which charges—like MDR—are levied, the absence of MDR auto­mat­i­cal­ly means no GST lia­bil­i­ty on such UPI transactions.

This pol­i­cy has not only kept dig­i­tal pay­ments afford­able for users and mer­chants alike but has also cat­alyzed the rapid adop­tion of UPI across urban and rur­al India.

Government’s Finan­cial Com­mit­ment to UPI

To fur­ther accel­er­ate dig­i­tal pay­ment adop­tion, par­tic­u­lar­ly among small and micro mer­chants, the Gov­ern­ment has been oper­at­ing a tar­get­ed Incen­tive Scheme for Pro­mo­tion of RuPay Deb­it Cards and Low-Val­ue BHIM-UPI Trans­ac­tions since FY 2021–22. The scheme aims to sub­si­dize trans­ac­tion costs that would oth­er­wise be incurred by finan­cial inter­me­di­aries, ensur­ing zero-cost dig­i­tal pay­ments for users.

The scheme’s finan­cial allo­ca­tions over the years under­line the scale of gov­ern­ment backing:

• FY 2021–22: ₹1,389 crore
• FY 2022–23: ₹2,210 crore
• FY 2023–24: ₹3,631 crore

These increas­ing allo­ca­tions reflect a sus­tained and strate­gic com­mit­ment to nur­tur­ing India’s dig­i­tal pay­ment infrastructure.

India: Glob­al Leader in Real-Time Dig­i­tal Payments

India’s UPI suc­cess sto­ry has not gone unno­ticed glob­al­ly. Accord­ing to the ACI World­wide Report 2024, India con­tributed to 49% of all glob­al real-time trans­ac­tions in 2023, cement­ing its sta­tus as the world’s dig­i­tal pay­ment powerhouse.

In terms of val­ue, UPI trans­ac­tions have wit­nessed unprece­dent­ed growth—scaling from ₹21.3 lakh crore in FY 2019–20 to a stag­ger­ing ₹260.56 lakh crore as of March 2025. P2M trans­ac­tions alone have surged to ₹59.3 lakh crore, a tes­ta­ment to grow­ing mer­chant accep­tance and con­sumer trust in dig­i­tal platforms.