Are you worried about paying GST on UPI transactions above ₹2,000? Recent rumors have triggered confusion and concern among digital payment users across India. But before you switch to cash or uninstall your UPI apps, here’s the real update – there is no GST on UPI transactions, and the Indian government has officially confirmed this.
Let’s break down everything you need to know about the current GST policy on UPI transactions as of June 2025.
GST on UPI Transactions: Government Says ‘No Tax on Digital Payments’
In April 2025, several media reports falsely claimed that the Indian government was planning to impose Goods and Services Tax (GST) on UPI payments exceeding ₹2,000. The Finance Ministry immediately denied these claims, stating clearly that no such proposal exists.
“The claims that the Government is considering levying Goods and Services Tax (GST) on UPI transactions over ₹2,000 are completely false, misleading, and without any basis. Currently, there is no such proposal before the Government.” — Finance Ministry, April 2025
This means that no matter the transaction value, users can make UPI payments without worrying about GST deductions.
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GST on UPI Transactions: What Exactly Is Taxed?
1. No GST on UPI Transfers (P2P or P2M)
Whether you are sending money to a friend (P2P) or paying a merchant (P2M), there is no GST charged on the transaction itself. The act of transferring money through UPI is not a taxable event.
2. No MDR = No GST
Since January 2020, the Merchant Discount Rate (MDR) on UPI transactions has been removed for P2M payments. As there is no service charge, GST is not applicable.
3. GST Only Applies to Service Charges (If Introduced)
If, in the future, UPI apps or payment gateways start charging a fee, then GST at 18% would apply only to that fee — not to the transaction amount.
4. GST on Products, Not the Payment Mode
If you use UPI to pay for goods or services, the GST applied is based on what you’re buying (5%, 12%, 18%, or 28%), not the fact that you paid via UPI.
GST on UPI Transactions: Summary Table (June 2025)
| What is being taxed? | GST Applicability |
|---|---|
| UPI payment (P2P or P2M) | No GST |
| Service fee (if charged by app/gateway) | GST at 18% (on the fee only) |
| Goods/services bought via UPI | GST as per item/service rate |
Why the Government Is Not Charging GST on UPI Transactions
The Indian government has made it a policy goal to promote digital payments, and UPI is at the center of this vision.
- MDR was waived in January 2020 to reduce merchant costs.
- Incentive schemes have been introduced since FY 2021–22 to promote low-value UPI transactions.
- Government spending on UPI incentives:
- FY 2021–22: ₹1,389 crore
- FY 2022–23: ₹2,210 crore
- FY 2023–24: ₹3,631 crore
These incentives are designed to make UPI more accessible, especially for small businesses and low-income users. Imposing GST on UPI payments would directly contradict this strategy.
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Digital Payment Growth: India Leading the World
India is now the global leader in real-time digital payments, accounting for 49% of all real-time transactions worldwide in 2023, according to the ACI Worldwide Report 2024.
UPI transaction values have exploded in the last few years:
- ₹21.3 lakh crore in FY 2019–20
- ₹260.56 lakh crore by March 2025
- P2M transactions alone: ₹59.3 lakh crore
This growth reflects strong public trust in UPI as a fast, free, and secure method of payment — and the government is working to keep it that way.
What UPI Users and Merchants Should Know
No GST on Using UPI
You can continue using UPI without any fear of GST deductions. There is no tax on the digital payment itself.
Watch for Service Charges in Future
If apps ever introduce a processing fee for UPI usage, GST will apply to that fee only, not the payment amount.
GST on Items Still Applies
When you use UPI to pay for a product or service, the regular GST rate applies to that item — but not because you’re using UPI.
Ignore the Fake News
No GST is being levied on UPI transactions above ₹2,000. This has been officially denied by the Finance Ministry.
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Final Verdict: No GST on UPI Transactions in June 2025
To be absolutely clear — as of June 2025, there is no GST on UPI transactions, regardless of whether they are peer-to-peer (P2P) or person-to-merchant (P2M). The government has reaffirmed its commitment to supporting digital payment systems, with no plans to introduce GST on UPI payments now or in the foreseeable future.
Digital transactions remain GST-free, easy, and highly encouraged as part of the Digital India initiative. If you’re using UPI, you’re not being taxed — and you’re helping build the future of India’s economy.