On April 18, 2025, the Indian government firmly denied circulating claims that it is planning to impose a Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding ₹2,000. In an official statement released by the Press Information Bureau (PIB), the government deemed such reports as "false, misleading, and without any basis." This clarification comes amid growing concerns among users and merchants regarding potential additional costs associated with high-value digital payments.
The government reassured the public that there is currently no proposal under consideration to levy GST on UPI transactions, emphasizing its commitment to promoting digital payments via UPI. "The government remains committed to promoting digital payments via UPI," the PIB statement reiterated.
UPI has revolutionized the way payments are made in India, particularly benefiting rural communities by eliminating the need for physical cash. The Central Board of Indirect Taxes & Customs (CBIC) also took to social media to clarify that while GST can apply to service charges like the Merchant Discount Rate (MDR) associated with certain payment methods, no MDR is charged on Person-to-Merchant (P2M) UPI transactions. This exemption has been in place since January 2020, following a Gazette Notification issued by the Central Board of Direct Taxes (CBDT) on December 30, 2019.
Since the removal of the MDR for P2M UPI transactions, which effectively eliminates the basis for GST, the government has been actively incentivizing digital payments. The UPI Incentive Scheme, operational since FY 2021-22, has allocated significant funds to encourage low-value UPI transactions. The disbursements under this scheme have increased over the years, with ₹1,389 crore allocated in FY 2021-22, ₹2,210 crore in FY 2022-23, and ₹3,631 crore in FY 2023-24.
India's UPI has emerged as a global leader in real-time digital payments, setting new benchmarks in scale, adoption, and impact. According to data from the National Payments Corporation of India (NPCI), UPI transactions reached a staggering ₹24.77 lakh crore in March 2025, marking a 12.7% increase from the previous month’s ₹21.96 lakh crore. Notably, this figure represents a 25% increase in value and a 36% growth in volume compared to the same month last year.
The ACI Worldwide Report 2024 highlighted India’s dominance in global real-time transactions, accounting for a remarkable 49% of all such transactions worldwide in 2023. This underscores India’s position as the most advanced real-time payments ecosystem, far surpassing other nations.
In the past five years, UPI payments have surged more than twelve times, growing from ₹21.3 lakh crore in FY 2019-20 to an impressive ₹260.56 lakh crore by March 2025. The volume of Person-to-Merchant (P2M) payments alone reached ₹59.3 lakh crore, reflecting increasing acceptance by small businesses and retailers, as well as rising consumer trust in cashless payments.
Despite the recent speculation, the government has assured users that there is no GST being applied to UPI transactions under ₹2,000. The confusion appears to have stemmed from a financial news report published in September 2024, following the 54th meeting of the GST Council. This report suggested that the council had discussed a proposal to apply GST on service charges collected by payment aggregators for UPI transactions under ₹2,000, but the decision was deferred, and no final decision has been made.
As it stands, UPI transactions remain free for users, meaning no GST is charged on the money being transferred, whether for personal or commercial use. The government clarified that any potential GST mentioned in media reports would apply only to service fees charged by payment aggregators, not on the transaction amount itself.
In conclusion, the Indian government is taking significant steps to promote and support the digital payments ecosystem through UPI, ensuring that users can continue to make transactions without the worry of additional taxes. With a strong incentive scheme in place and a commitment to fostering innovation in digital payments, India is set to maintain its leading position in the global digital payments landscape.
