The government on Friday firmly rejected widespread claims that it is planning to introduce Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding ₹2,000, calling the rumors “false, misleading, and baseless.” In an official press statement, the Ministry of Finance clarified, “There is no such proposal under active consideration,” stressing that such misinformation not only creates confusion but also undermines the government’s efforts to promote a digitally empowered economy.
Currently, UPI transactions — particularly those made to merchants — do not incur any additional charges, including GST. This is because the Merchant Discount Rate (MDR), a fee traditionally charged to merchants on digital payments, was scrapped by the government in January 2020 for UPI and RuPay card transactions. Since GST is applied on MDR, the elimination of MDR automatically nullified any scope for GST on these payments. This zero-cost model for digital payments has been a cornerstone of India’s digital transformation journey, making digital modes of transaction more accessible and attractive to small businesses and the general public alike.
Reinforcing its pro-digital stance, the government pointed to the incentive scheme introduced in 2021 aimed at promoting UPI payments, especially among micro and small enterprises. Under this scheme, the government compensates payment service providers to offset operational and infrastructure costs, ensuring that neither merchants nor consumers bear any financial burden for using UPI. The payouts under this initiative have steadily increased, reflecting the government’s consistent support — with ₹1,389 crore disbursed in 2021–22, ₹2,210 crore in 2022–23, and ₹631 crore in 2023–24.
Officials said these incentives have translated into a sharp uptick in the adoption of UPI payments. According to a report by global payments firm ACI Worldwide, India accounted for nearly half — 49% — of all real-time digital transactions conducted globally in 2023, far surpassing countries like China and the U.S. This milestone reflects not only the scale of India’s digital infrastructure but also the behavioral shift among consumers and businesses toward cashless commerce.
The growth of UPI has been nothing short of phenomenal. In just five years, the volume of UPI transactions has expanded more than twelvefold — from ₹21.3 lakh crore in 2019–20 to a projected ₹260 lakh crore by the end of fiscal year 2024–25. Payments made specifically to merchants also saw a record surge, touching ₹59.3 lakh crore. This reflects a deepening trust in digital payment platforms across all strata of society, from urban shoppers and online customers to roadside vendors and rural entrepreneurs.
The government reiterated that far from imposing new taxes on digital payments, its policies are actively geared toward strengthening and expanding the digital ecosystem. UPI has played a crucial role in financial inclusion, bringing millions into the formal banking fold, reducing dependency on cash, and enabling seamless transactions even in the remotest corners of the country.
Experts note that levying GST on UPI transactions would run counter to the government’s long-standing digital push and could dampen enthusiasm for online payments. The quick clarification from the Ministry was therefore not only timely but essential in quelling public anxiety and misinformation.
In summary, the government’s message was unambiguous — there is no GST on UPI transactions, no plan to introduce it, and its broader strategy continues to be one of incentivizing, not penalizing, digital adoption. Users and businesses can thus continue to rely on UPI as a fast, secure, and completely tax-free mode of transaction, aligned with India’s vision of becoming a trillion-dollar digital economy.
