The Ministry of Finance on Friday (April 18) dismissed reports suggesting that the government is considering levying Goods and Services Tax (GST) on UPI transactions over Rs 2,000, calling them “completely false, misleading, and baseless.”
“Currently, there is no such proposal before the government,” the ministry said in a statement. “Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions,” the ministry said.
GST is applicable on certain payment-related charges like the Merchant Discount Rate (MDR). However, since January 2020, the Central Board of Direct Taxes (CBDT) has eliminated MDR on person-to-merchant (P2M) UPI transactions. As a result, no GST is applicable on such UPI payments, the ministry reiterated.
UPI usage has soared, with transaction values surging from Rs 21.3 lakh crore in FY 2019-20 to a staggering Rs 260.56 lakh crore by March 2025.
To further boost digital transactions, especially low-value UPI (P2M) payments, the government has been running an incentive scheme since FY 2021-22. This scheme benefits small merchants by offsetting transaction costs and encouraging broader adoption of digital payments.
In 2023-24, the government disbursed Rs 3,631 crore under this scheme, up from Rs 2,210 crore in 2022-23, reflecting its strong commitment to UPI-led digital transformation.
“The total incentive payouts under this scheme over the years reflect the government’s sustained commitment to promoting UPI-based digital payments,” the ministry noted.