The Government of India has categorically denied allegations regarding the imposition of Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding ₹2,000, labeling such claims as completely false, misleading, and without any basis. Official statements confirm that no such proposal is under consideration, dispelling rumors that have recently gained traction.
GST, as clarified by the Ministry of Finance, is levied solely on transaction-related charges such as the Merchant Discount Rate (MDR) applicable to payments processed via certain instruments. Effective January 2020, the Central Board of Direct Taxes (CBDT) eliminated the MDR on Person-to-Merchant UPI transactions through a Gazette Notification issued on December 30, 2019. As a result, UPI transactions are currently exempt from MDR charges and, consequently, from GST.
The Government remains firmly committed to fostering the growth and accessibility of UPI-based digital payments. To underscore its dedication to this critical sector, an Incentive Scheme for UPI transactions has been operational since the fiscal year 2021–22. This scheme specifically encourages low-value UPI transactions between individuals and merchants, significantly benefiting small businesses by reducing transaction costs and encouraging broader adoption of digital payment solutions.
The total incentive payouts under this scheme reflect the Government’s sustained commitment to promoting UPI-based digital payments. Allocations have steadily increased over the years, rising from ₹13.89 billion in the 2021–22 fiscal year to ₹22.10 billion in 2022–23, and further escalating to ₹36.31 billion in 2023–24. These growing figures underscore the importance of UPI in the broader policy framework aimed at enhancing economic inclusion and innovation.
The results of these initiatives are evident in the exponential growth of UPI usage. According to the 2024 ACI Worldwide Report, India accounted for an astounding 49 percent of global real-time transactions in 2023, cementing its position as a global leader in digital payment innovation. The cumulative value of UPI transactions has surged from ₹2.13 trillion in the 2019–20 fiscal year to an astonishing ₹26.06 trillion by March 2025. Within this remarkable trajectory, Person-to-Merchant transactions alone have reached ₹5.93 trillion, reflecting the increasing confidence of both merchants and consumers in the UPI platform.
The Ministry of Finance emphasized that these advancements align seamlessly with the Government’s vision of a digitally empowered economy. The robust expansion of UPI underscores its critical role in India’s financial ecosystem, with substantial implications for fostering innovation and enhancing economic inclusion.
India’s digital payment framework continues to serve as a model for other economies, showcasing how targeted policy measures, coupled with technological ingenuity, can revolutionize financial transactions on an unprecedented scale.
