No GST on UPI transactions above ₹2,000, clarifies Finance Ministry

A ministry release said that since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions

The finance ministry on Friday issued a clarification rejecting rumours that it is considering levying GST on UPI transactions above ₹2,000, calling such claims "completely false, misleading and without any basis".

 

"Currently, there is no such proposal before the government," the finance ministry said.

 

"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," it added.

 

MDR refers to a fee that merchants pay banks or companies processing payments for executing a transaction. 

 

It further said that since currently no MDR is charged on UPI transactions, there is consequently no GST applicable to these transactions.

 

Last month, the Payments Council of India (PCI) - a representative body of digital payments players in India - had written to the prime minister demanding a 0.30 per cent MDR on transactions made through UPI at large merchants. It had also sought to introduce an MDR structure on RuPay debit card transactions applicable to merchants of all sizes.

 

The demand for imposing an MDR had come in the wake of a cut in the outlay for incentives to promote low-value transactions. The government had only allocated ₹1,500 crore for FY2025 for the promotion of low-value BHIM-UPI transactions when made from peers to merchants, down from the ₹3,268 crore approved in FY24.