No GST on UPI Payments

The Finance Ministry has issued a clarification rejecting widespread rumours that the government is considering levying GST on UPI transactions above ₹2,000. The ministry called such claims "completely false, misleading and without any basis."

"Currently, there is no such proposal before the government," the ministry stated. It explained that GST is levied only on charges, such as the Merchant Discount Rate (MDR), related to payments made using specific instruments. However, effective January 2020, the Central Board of Direct Taxes (CBDT) removed the MDR on person-to-merchant (P2M) UPI transactions.

MDR refers to the fee that merchants pay to banks or payment companies for processing transactions. Since there is no MDR currently charged on UPI transactions, no GST is applicable either.

Last month, the Payments Council of India (PCI) had requested the prime minister to introduce a 0.30% MDR on large merchant UPI transactions and apply a similar structure to RuPay debit card transactions. This demand arose after the government's FY2025 allocation for promoting low-value BHIM-UPI transactions was cut to ₹1,500 crore, compared to ₹3,268 crore in FY2024.