GST on UPI transactions over ₹2,000? Here’s what you need to know

GST on UPI payments: The government has denied media reports claiming it is considering proposals to levy goods and services tax (GST) on unified payments interface (UPI) transactions exceeding ₹2,000. The finance ministry clarified on April 18 that claims that it is considering levying GST on UPI transactions over ₹2,000 are “completely false, misleading, and without any basis.” Currently, no such proposal is before the government.

Earlier today, certain media reports claimed that digital payments made via UPI exceeding the ₹2,000 threshold in a single transaction may be brought under the GST framework for compliance. This aimed to enhance tax compliance and bring more digital transactions into the formal economy.

Govt may levy 18% GST on UPI payments: Report

“If approved, an 18 per cent GST, the standard rate for most digital services, could be levied on high-value transactions. The proposal is still under consideration. The move could significantly shift India’s UPI ecosystem, which has been a cost-free, user-friendly platform,” claimed the reports.

Finance ministry denies ‘false misleading’ reports

The finance ministry said that GST is levied on charges, such as the Merchant Discount Rate (MDR), relating to payments made using certain instruments. Effective January 2020, the Central Board of Direct Taxes (CBDT) has removed the MDR on Person-to-Merchant (P2M) UPI transactions through the Gazette Notification dated December 30, 2019.

Since no MDR is currently charged on UPI transactions, no GST is consequently applicable. The government remains committed to promoting digital payments via UPI. A government-led incentive scheme has been operational from FY 2021-22 to support and sustain UPI's growth.

“This scheme targets low-value UPI (P2M) transactions, benefiting small merchants by alleviating transaction costs and promoting wider participation and innovation in digital payments,” said the finance ministry.

The total incentive payouts under this scheme over the years reflect the Government’s sustained commitment to promoting UPI-based digital payments. Allocation under the scheme over the years has been:

• FY2021-22: ₹1,389 crore

• FY2022-23: ₹2,210 crore

• FY2023-24: ₹3,631 crore

These measures have significantly contributed to India’s robust digital payments ecosystem. According to the ACI Worldwide Report 2024, India accounted for 49 per cent of global real-time transactions in 2023, reaffirming its position as a global leader in digital payments innovation.

UPI transaction values have increased exponentially, from ₹21.3 lakh crore in FY 2019-20 to ₹260.56 lakh crore by March 2025. Specifically, P2M transactions have reached ₹59.3 lakh crore, reflecting growing merchant adoption and consumer confidence in digital payment methods.