On April 18, 2025, reports surfaced indicating that the Indian government is evaluating a proposal to impose the Goods and Services Tax (GST) on high-value Unified Payments Interface (UPI) transactions exceeding ₹2,000. This potential move aims to enhance tax compliance and formalize more digital transactions within the economy.
The proposal suggests that transactions made through UPI, which has become a popular method for both peer-to-peer and merchant payments, could soon attract an 18% GST. This rate aligns with the standard GST applicable to many digital services in India.
Currently, UPI transactions are free of GST, which has contributed to its rapid adoption among users for various payments, from groceries to online services. In March 2025 alone, UPI transactions reached a staggering ₹24.77 lakh crore, marking a significant 12.7% increase over February's ₹21.96 lakh crore, according to the National Payments Corporation of India (NPCI).
While the government is still considering the proposal, no official confirmation or timeline for implementation has been provided. Financial experts have expressed concerns about the implications of introducing GST on high-value UPI transactions. Anand K Rathi, Co-founder of MIRA Money, pointed out that UPI is primarily a bank-to-bank transfer system, which typically incurs no fees. He explained, "If UPI platforms like PhonePe, Paytm, or Google Pay start charging a service fee, then GST would only apply to that service charge — not on the transaction amount itself." This means that if a user transfers ₹2,000, only any potential service fee charged by the platform would be subject to GST.
Despite the concerns raised, the Central Board of Indirect Taxes and Customs (CBIC) took to social media to clarify that claims regarding the government considering GST on UPI transactions over ₹2,000 are misleading. The Ministry of Finance stated, "Currently, there is no such proposal before the government." They emphasized that GST is levied on charges related to payments made using certain instruments, and since no Merchant Discount Rate (MDR) is charged on UPI transactions, there is consequently no GST applicable to these transactions.
The context for this proposal arises as the government seeks to improve tax collection and bring more digital transactions into the formal tax system. In February 2025, total GST collections rose by 9.1% year-on-year, reaching ₹1.84 lakh crore. This includes various components of GST: Central GST (CGST) at ₹35,204 crore, State GST (SGST) at ₹43,704 crore, Integrated GST (IGST) at ₹90,870 crore, and a Compensation Cess of ₹13,868 crore. The government sees potential for further improvement, particularly in the growing digital payment space.
Critics of the proposed GST on UPI transactions argue that it could deter users from utilizing digital payment methods, particularly in rural areas where cash transactions are still prevalent. Manish Kumar Goyal, Chairman & MD of Finkeda, warned that imposing charges on regular UPI usage could slow down India's digital growth, stating, "If UPI becomes expensive, people might go back to using cash." This concern highlights the delicate balance the government must maintain as it promotes digital payments while ensuring tax compliance.
For now, UPI remains a cost-free option for most users, especially for peer-to-peer (P2P) and small merchant payments. The government has not made a final decision regarding the GST proposal, and any potential changes will be closely monitored by both consumers and businesses who frequently engage in high-value transactions. If the proposal is approved, users making large payments via UPI might soon find themselves subject to an 18% GST.
The ongoing discussions around GST on UPI transactions underscore the evolving landscape of digital payments in India. With the government committed to promoting digital transactions, it is crucial for users to stay informed about any changes that may impact their payment methods. As of now, UPI users can continue to enjoy the benefits of this efficient payment system without the burden of GST on their transactions.
