Is GST Applicable on UPI Transactions Over ₹2,000? Govt Says No
With rising concerns over GST applicability on UPI transactions exceeding ₹2,000, the Indian government has officially denied such claims. The Ministry of Finance clarified that no GST is being imposed on UPI payments, reinforcing its commitment to fostering digital transactions.
Let’s break this down for clarity.
What Exactly Did the Government Say?
As per the official clarification issued via PIB and media reports:
- The rumour of GST on UPI is completely false.
- There is no change in GST law applicable to UPI transactions.
- No Merchant Discount Rate (MDR) is charged on UPI – so no GST arises.
- Govt continues to promote zero-cost digital payment infrastructure.
This means: UPI payments, regardless of amount, continue to be 100% tax-free.
What Is MDR and Why Does GST Depend on It?
MDR (Merchant Discount Rate) is a fee charged by banks to process card or digital payments.
- GST is only applicable on service fees like MDR.
- Since the govt has exempted MDR for UPI and RuPay transactions, no GST is involved.
No MDR = No supply of taxable service = No GST.
Legal Angle: Where Does the Law Stand?
- As per GST Council Decision (2019) and RBI circular (2020):
- MDR on UPI & RuPay debit card transactions is waived.
- Hence, no taxable supply under GST law.
- GST Act Reference: Section 9 – GST is applicable on supply of goods or services. If there’s no consideration or service, it’s outside GST scope.
🔗 RBI Circular on MDR Exemption
UPI: India’s Digital Payment Backbone
- Over 11 billion UPI transactions in March 2025 alone.
- UPI volume grew 38% YoY, showing public trust in digital payments.
- The govt has invested in UPI Lite, UPI for feature phones, and cross-border UPI.
India leads the world in real-time digital payments – free of MDR and GST.
Don’t Fall for Clickbait Rumours
Many social media posts misinterpret tax laws. Here’s a practical tip:
“Always verify tax changes from PIB, GST Council, or CBIC. WhatsApp forwards aren’t law.”