Unified Payments Interface (UPI) has transformed digital payments in India, making transactions seamless, instant, and widely accessible. With the exponential growth of UPI—handling nearly half of global real-time digital transactions in 2023—questions often arise about the taxation of these payments, especially regarding the Goods and Services Tax (GST).

Is GST Applicable on UPI Transactions?

Contrary to recent rumors, there is no GST levied on UPI transactions, including those above ₹2,000. The Government of India and the Finance Ministry have categorically clarified that claims about imposing GST on UPI payments are "completely false, misleading, and without any basis." There is currently no proposal under consideration to tax UPI transactions directly.

Why Isn’t GST Charged on UPI Transfers?

UPI acts as a payment infrastructure, simply facilitating the transfer of funds between parties. Since it does not constitute a supply of goods or services, the core UPI transaction is not subject to GST1. Additionally, the Merchant Discount Rate (MDR)—a fee previously charged on digital payments—was removed for person-to-merchant (P2M) UPI transactions in January 2020. With no MDR, there is no GST applicable to these transactions.

Are There Any GST-Related Charges on UPI?

GST may only apply if banks or third-party providers charge a fee for certain value-added services related to UPI. In such cases, the standard GST rate of 18% would apply to the service fee, not to the UPI transaction itself.

Promoting Digital Payments

The government continues to incentivize UPI adoption, especially among small merchants, through dedicated schemes and payouts, reinforcing its commitment to a cashless economy.

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