GST on UPI payments? The government clarified on Friday, April 18, that it is not considering levying goods and services tax (GST) on unified payment interface (UPI) transactions above ₹2,000. Denying media reports that the government is considering levying a tax on UPI transactions over ₹2,000, the finance ministry said they are completely false, misleading, and without any basis.

"Currently, there is no such proposal before the government," the finance ministry said in a statement. GST is levied on charges, such as the Merchant Discount Rate (MDR), relating to payments made using certain instruments. Effective January 2020, the Central Board of Direct Taxes (CBDT) has removed the MDR on person-to-merchant (P2M) UPI transactions.

Govt denies levying GST on UPI transactions

"Since currently no MDR is charged on UPI transactions, there is no GST applicable to these transactions," said the ministry. According to the government, UPI transaction values have increased exponentially, from ₹21.3 lakh crore in FY 2019-20 to ₹260.56 lakh crore by March 2025.

"The ministry also said the government remains committed to promoting digital payments via UPI. An incentive scheme has been operational since FY2021- 22 to support and sustain UPI's growth," it said in its statement. The total incentive payouts under the scheme reflect the promotion of UPI-based digital payments.

This scheme targets low-value UPI (P2M) transactions, benefiting small merchants by alleviating transaction costs and promoting wider participation and innovation in digital payments. 2023-24, the government paid ₹3,631 crore under the scheme, up from ₹2,210 crore in 2022-23.

"The total incentive payouts under this scheme over the years reflect the government's sustained commitment to promoting UPI-based digital payments," the finance ministry noted. According to the ACI Worldwide Report 2024, India accounted for 49 per cent of global real-time transactions in 2023, reaffirming its position as a leader in digital payments innovation.

GST Collections

Official data showed that central and state governments collected ₹1.77 trillion in GST in March after adjusting for refunds, 7.3 per cent more than receipts at the same time a year ago. The official data showed that in FY25, GST collections rose 8.6 per cent after adjusting for refunds to ₹19.56 trillion.

Data from GSTN, the state-owned company that processes tax returns, showed that in FY25, GST collections jumped 8.6 per cent after adjusting for refunds to ₹19.56 trillion. The government's net tax revenue from domestic sales grew 9.3 per cent annually to ₹1.38 trillion in March.