No GST on UPI Transactions: What the Government Clarified
Amid widespread confusion, the government has officially clarified that no GST is levied on UPI transactions, even those above ₹2,000. In a written reply to the Rajya Sabha on 23 July 2025, Minister of State for Finance Shri Pankaj Chaudhary dismissed all social media rumors about tax on digital payments.
This blog clears the air with verified facts, official references, and what this means for Indian users and businesses.
What Did the Government Say?
- On 23rd July 2025, MoS Finance Pankaj Chaudhary responded to a parliamentary question regarding GST on UPI payments.
- He stated that no GST is applicable on UPI transactions made by customers, regardless of value.
- The clarification came after multiple false claims on social media suggested GST would be charged on UPI payments over ₹2,000.
- The government reiterated its stand to promote digital payments and avoid burdening consumers with transaction taxes.
Why There Is No GST on UPI Transactions
As per the current law:
- GST is not levied on the mode of payment (like UPI, NEFT, IMPS, RTGS).
- GST applies only when there is a supply of goods or services.
- A UPI transfer is just a method of settlement, not a supply.
For example:
| Scenario | GST Applicable? |
|---|---|
| Paying restaurant bill via UPI | Yes (on food) |
| Transferring ₹10,000 to a friend via UPI | No |
| Sending UPI to pay rent | No (if personal) |
| Using UPI for business invoice | Yes (on service) |
Legal Reference
- GST Act, 2017 – GST is levied on supply of goods/services, not payment methods.
- RBI Circulars & NPCI Guidelines – No service charge on UPI P2P transfers.
- Government has consistently clarified that digital payment rails are free from GST.
The clarification aligns with the Digital India push and NPCI’s zero-MDR model for UPI and RuPay.
Expert View: Don’t Fall for Viral Misinformation
Many users confuse income tax tracking or TDS on business payments with GST on digital methods. But these are separate compliance issues.
“There is no GST on UPI or bank transfers. Businesses may have TDS or GST obligations based on supply—but not because of UPI itself.”
— CA R. Menon, GST Consultant
Digital Payments Still Encouraged
The government has offered the following support:
- No MDR (Merchant Discount Rate) on UPI/RuPay for small businesses.
- Cashback schemes and incentives for using UPI.
- Faster refunds and real-time reporting through UPI-linked billing systems.
How Efiletax Helps
Whether you are a small trader using UPI or a large business accepting QR payments, Efiletax helps you stay compliant:
- UPI-linked invoice + GST filing
- Auto-reconciliation with bank entries
- TDS + GST tracking on digital collections
Go digital, stay compliant — with Efiletax.
FAQs: GST on UPI Transactions
Q1. Is there any GST on UPI payments above ₹2,000?
No. Mode of payment doesn’t attract GST. The ₹2,000 threshold is irrelevant.
Q2. Do merchants pay GST on receiving UPI?
Yes, if the underlying transaction involves taxable goods or services.
Q3. Can GST be charged on UPI transfer between friends?
No. There is no supply of goods or services, so GST doesn’t apply.
Summary
There is no GST on UPI transactions, even above ₹2,000, confirms MoS Finance in Rajya Sabha. UPI is a payment method—not a taxable event. GST applies only when goods or services are supplied, not on the digital mode of transfer.