Rumors were flying this week about the government planning to slap GST on UPI payments above Rs 2,000 — but the Finance Ministry has come out and firmly shut those down.
“There is no such proposal,” the ministry said in a statement, calling the reports “baseless and misleading.” The clarification comes after a flurry of social media chatter and news articles suggesting that a new tax might be in the pipeline for higher-value UPI transactions.
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To set the record straight: UPI payments themselves don’t attract GST. The tax only comes into play on specific charges — like the merchant discount rate (MDR) — which, in this case, doesn’t apply. The government reminded the public that MDR on UPI transactions between individuals and merchants (P2M) was scrapped way back in January 2020. Since there’s no MDR, there’s nothing for GST to be applied to.
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The Finance Ministry also reiterated its continued support for India’s booming digital payments ecosystem. In fact, far from taxing it, the government’s been actively funding UPI adoption through incentive schemes aimed at making low-value transactions easier and cheaper — especially for small businesses.
Here’s what the government’s put behind UPI so far:
- Rs 1,389 crore in incentives in FY 2021–22
- Rs 2,210 crore in FY 2022–23
- Rs 3,631 crore in FY 2023–24
Bottom line: UPI remains tax-free for users, even for payments above Rs 2,000. The government’s stance is clear — keep digital transactions easy, fast, and friction-free.
