UPI remains GST-free: Centre clarifies no tax on digital payments

Amid circulating claims on social media, the Centre has firmly denied reports that it is planning to impose GST on UPI transactions over Rs 2,000. The Ministry has clarified that such claims are completely false, misleading, and baseless.

There is currently a lot of discussion surrounding the imposition of GST on UPI transactions exceeding Rs 2,000. This news has captured the attention of various UPI user groups, including individual users and small business owners, causing significant speculation within the community. 

Following the buzz on social media, the Central Board of Indirect Taxes & Customs took to the social media platform X explaining the government's stand on charging GST on digital payments. It said UPI has revolutionised the way people in rural communities can make payments and receive funds, eliminating the need for physical cash.

"The claims that the Government is considering levying GST on UPI transactions over ₹2,000 are completely false, misleading, and without any basis. Currently, there is no such proposal before the government. GST is levied on charges, such as the Merchant Discount Rate (MDR), relating to payments made using certain instruments. Effective January 2020, the CBDT has removed the MDR on Person-to-Merchant (P2M) UPI transactions through the Gazette Notification dated 30th December 2019. Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions," the post read.

Here’s what you need to know:

No GST on UPI: There is no proposal under consideration to levy GST on UPI payments.

No MDR = No GST: Since Merchant Discount Rate (MDR) was removed for Person-to-Merchant (P2M) UPI payments in January 2020, GST is not applicable on such transactions.

The CBDT notification dated 30th December 2019 officially abolished MDR for P2M UPI payments.

Government Is Promoting, Not Taxing UPI

Contrary to the false claims, the government has been actively incentivising digital payments, especially low-value UPI transactions. To support this, a UPI Incentive Scheme has been in place since FY 2021-22:

FY 2021-22: Rs 1,389 crore

FY 2022-23: Rs 2,210 crore

FY 2023-24: Rs 3,631 crore

These payouts help cover transaction costs for merchants, encouraging wider adoption and innovation in digital payments.

UPI in India

India's UPI has emerged as a global leader in real-time digital payments, setting new benchmarks in scale, adoption, and impact.

According to data from the National Payments Corporation of India (NPCI), transactions through UPI reached a new peak in March, totaling Rs 24.77 lakh crore. This marks a 12.7% increase from the previous month's total of Rs 21.96 lakh crore. The NPCI also reported that the value of UPI transactions in March 2025 was significantly higher than in the same month last year, with a total of Rs 24.77 lakh crore compared to Rs 19.78 lakh crore. In addition, UPI transactions in March 2025 saw a 25% increase in value and a 36% growth in volume compared to the previous year.

According to the ACI Worldwide Report 2024, India accounted for a staggering 49% of all global real-time transactions in 2023, far surpassing other nations and solidifying its position as the world’s most advanced real-time payments ecosystem.

The growth in transaction value is equally impressive. UPI payments surged from Rs 21.3 lakh crore in FY 2019-20 to Rs 260.56 lakh crore by FY 2024-25, highlighting its rapid integration into daily life. Notably, Person-to-Merchant (P2M) payments reached Rs 59.3 lakh crore, indicating increasing acceptance by small businesses and retailers, as well as rising consumer trust in cashless payments.