The Finance Ministry has denied recent reports suggesting that the government is considering levying GST on UPI transactions exceeding ₹2,000. In an official statement, the ministry called such claims “false, misleading, and baseless,” confirming that there is currently no such proposal under consideration.
As of now, GST only applies to the merchant discount rate (MDR) on certain payment instruments. However, peer-to-merchant (P2M) UPI payments have been exempt from MDR since January 2020, effectively making them tax-free. The ministry clarified that since UPI transactions do not carry MDR, no GST is applicable either.
This clarification comes in response to media speculation that high-value UPI payments might soon attract GST as part of efforts to boost tax compliance and formalize digital payments. The MDR exemption was introduced in 2020 through amendments to the Payments and Settlement Systems Act and the Income-tax Act, aimed at promoting digital transactions using RuPay and BHIM-UPI.
Thanks to these exemptions, UPI has become India’s most widely used digital payment method, with over 18,500 crore transactions worth ₹260.56 lakh crore recorded in FY 2024–25. Despite its massive adoption, concerns have been growing over UPI’s long-term viability, as banks and payment service providers currently bear infrastructure costs without earning revenue due to the zero-MDR policy.
Industry players have been urging the government to reconsider the regime, proposing a 0.3% MDR on transactions above ₹2,000—but only for large merchants with annual turnover exceeding ₹20 lakh. These discussions come as UPI has faced multiple outages in recent weeks. At a recent meeting with banks and third-party app providers, the NPCI attributed the disruptions to hardware issues and advised participants to avoid public commentary on the matter.
