In a relief for Unified Payments Interface (UPI) users, the Ministry of Finance on July 22 came out with a clarification pertaining to the GST applicability on UPI transactions.
Rajya Sabha member Anil Kumar Yadav raised a query in the House, asking if the government is considering a proposal to levy GST on UPI transactions of over Rs 2,000. The member also sought to know whether the government has received any representation from the public at large not to introduce such a measure, which will seriously affect the common man.
Replying to the query, Minister of State in the Ministry of Finance Pankaj Chaudhary said that such decisions are taken on the basis of GST Council recommendations and there was no such recommendation.
“As informed by the Department of Revenue, GST rates and exemptions are decided based on recommendations of the GST Council, which is a Constitutional body comprising of members from both the Centre and States/UTs. There is no such recommendation from the GST Council,” Chaudhary said in his reply.
UPI today is the most preferred online payment method among retail customers and small businesses. The reason for this is – its easy process, fast transactions, and attractive offers like cashback and coupons. But every now and then, media reports start doing the rounds suggesting that GST can now be levied on UPI transactions.
At present, is GST levied on P2P or P2M UPI transactions?
GST is not levied on any type of UPI transaction right now – whether it is between two individuals (Peer-to-Peer or P2P) or between a person and a merchant (Peer-to-Merchant or P2M). GST is not levied irrespective of the amount of the transaction.
However, if a payment aggregator or gateway levies a service charge on a UPI transaction, then GST is applicable only on that service charge and not on the transaction amount.
In 2024, a proposal came out in which there was a discussion of imposing 18% GST on the service charge levied on UPI transactions above Rs 2,000. But till now, the GST Council has not recommended it.
Latest clarification of the government – no need to fear
In April this year, the Finance Ministry issued a press release clarifying that the government does not intend to impose any GST on the amount of UPI transactions, even if it is more than Rs 2,000. It specifically mentioned that there will be no GST on payments made from person to merchant (P2M).
In fact, since December 2019, the government has removed the Merchant Discount Rate (MDR) i.e. transaction fee. When there is no charge on the transaction, then the question of levying GST does not arise.
Note: If you are making payments through UPI, you do not need to worry about GST at the moment. Yes, if any service charge is taken by an app or bank, GST may be levied on it – but not on the transaction amount.