The Government of India on Friday, April 18, 2025, issued a strong clarification denying reports that it plans to impose Goods and Services Tax (GST) on UPI transactions above ₹2,000.
In a statement, the Finance Ministry said the reports are “completely false, misleading, and without any basis.” It added, “Currently, there is no such proposal before the government.”
No MDR, No GST
The Ministry reiterated that GST is only levied on charges like the Merchant Discount Rate (MDR) applicable to certain payment instruments. However, since January 2020, the Central Board of Direct Taxes (CBDT) has removed the MDR on person-to-merchant (P2M) UPI transactions.
“Since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions,” the Ministry emphasized.
UPI Growth and Government Incentives
UPI usage has skyrocketed over the years. From ₹21.3 lakh crore in FY 2019-20, UPI transaction value reached ₹260.56 lakh crore by March 2025, showing the massive adoption of the digital payment mode.
To support this surge, the government launched an incentive scheme from FY 2021-22, particularly to encourage low-value P2M UPI transactions and support small merchants.
Under this scheme:
- ₹2,210 crore was paid in FY 2022-23
- ₹3,631 crore was disbursed in FY 2023-24
These payouts underscore the government’s sustained effort to promote and support UPI-based digital transactions, the Ministry said, reaffirming that digital payments remain a top policy priority.
