No GST on UPI Transactions: Government Clarifies in Rajya Sabha
The Finance Ministry, through a clear statement in Rajya Sabha in 2025, has confirmed that there is no GST applicable on UPI transactions, regardless of the transaction amount, including those exceeding ₹2,000. This clarification puts to rest widespread rumors about taxes on everyday digital payments using UPI.
Government’s Official Stance on GST and UPI
The government emphasized that no Goods and Services Tax (GST) is charged on the transaction value of UPI payments made by individuals.
The removal of Merchant Discount Rate (MDR) since December 2019 means that neither merchants nor customers pay transaction fees that could attract GST.
GST concerns apply only to service fees or platform charges levied by payment aggregators or intermediaries, but such fees currently are not applicable to UPI payments, which remain free for users.
The Ministry reaffirmed its commitment to promoting a robust, cost-free digital payment ecosystem for consumers and small merchants.
Implications for Users and Merchants
End-users enjoy GST-free UPI transactions, helping keep digital payments affordable and convenient.
Merchants and payment service providers may face GST on any service fees if charged, but currently, no such fees exist on UPI transactions, ensuring zero GST burden on businesses linked to UPI usage.
Any GST notices related to UPI payments typically concern aggregate turnover compliance and accounting but do not imply GST on the transaction value itself.
Why This Clarification Matters
UPI usage has skyrocketed to over ₹260 lakh crore in transaction value in FY 2024-25, and taxation clarity is crucial to avoid fear and misinformation.
The government’s assurance maintains trust in the UPI system as a cost-effective and accessible payment mode for everyone.
It supports efforts toward digital financial inclusion and transparency in financial transactions.
Frequently Asked Questions (FAQ)
Is GST applicable on UPI transactions above ₹2,000?
No, GST is not applicable on UPI transactions irrespective of the amount. The government has confirmed there are no plans to levy GST on UPI transaction values.
Do users pay GST on sending or receiving money via UPI?
No, individual users do not pay any GST on UPI transactions, whether person-to-person or person-to-merchant.
Are merchants charged GST for payments received through UPI?
Merchants are not charged GST on the transaction value itself as there is no Merchant Discount Rate or transaction fee currently. GST applies only to any service charges if levied, which is rare for UPI.
What about GST notices related to UPI transactions?
GST notices usually pertain to compliance with aggregate turnover rules or improper accounting, not that GST is charged on UPI transactions themselves.
Will GST on UPI transactions be introduced in the future?
As of now, there are no government plans to impose GST on UPI transaction values, focusing instead on promoting free and digital payment adoption.
How does this affect digital payment users and small businesses?
It ensures that digital payments remain low-cost and accessible, supporting financial inclusion and reducing transaction costs for citizens and merchants.
Published on: July 27, 2025
Published by: Selvi
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