The rumors of GST on UPI transactions being liable to the Goods and Services Tax (GST) were categorically denied by the Ministry of Finance in a statement released on April 18, 2025. They called out the misinformation circulating, describing it as “completely false, misleading, and without any basis,” particularly the claim that UPI payments exceeding ₹2,000 would attract GST. With UPI being the backbone of online payments in India and experiencing remarkable growth, this reassurance emphasizes its vital role in moving the country towards a paperless economy.
UPI in 2025—Breaking Records and Going Global
March 2025 Sees 17.73 Billion Transactions
A record 17.73 billion UPI transactions were made in March 2025, up 10.1% from February’s 16.11 billion, according to the National Payments Corporation of India (NPCI). The total transaction value hit an impressive ₹28.66 lakh crore, demonstrating the growing trust and widespread adoption of UPI across urban and rural regions of India. This growth pattern is consistent with the platform’s performance over the past year. In the fiscal year 2023–24, UPI processed more than 13,116 crore transactions, a remarkable increase from just 92 crore The fact that UPI handled over 13,116 crore transactions in The fact that the fiscal year 2023–2024 saw a significant increase from FY 2017–18’s meager 92 crore indicates that UPI has completely transformed the payment landscape in India. Everyone is on board, whether street vendors or big multinational companies.
No GST on UPI Transfers, Government Reaffirms
Official Ministry Statement Clears the Air
Due to the numerous rumors circulating on social media and some discussion in online forums, there has been a great deal of confusion regarding GST on UPI transactions. Many people thought that any UPI payments exceeding ₹2,000 would be subject to taxes as of April 1, 2025. The government has intervened, though, to clarify that UPI is merely a payment method and not a service. Thus, UPI payments won’t be subject to GST whether you’re sending money to a friend or conducting business. In other words, there won’t be a GST charge if you use UPI to send money.
Video Source CNBC TV18
What About Service Fees and MDR?
Distinction Between Transfer and Value-Added Services
GST may be applied to some auxiliary services connected to UPI, even when the transaction value is GST-free. As an illustration:
- Top-tier business dashboards
- Payment APIs that operate automatically
- Tools for analytics and reporting, SMS, or bundles of support for retailers
These optional services, which are targeted more at businesses than average consumers, are typically subject to 18% GST.
Merchant Discount Rate (MDR) Still Waived for P2M Transactions
As of January 1, 2020, there has been no MDR on person-to-merchant (P2M) UPI transactions, based on the Gazette notification from the Department of Revenue. This means that there’s no GST on these waived fees, since the charge doesn’t even exist.
Business Implications: Clarity Brings Confidence
For Small Businesses and Startups
This update is a big deal for micro and small enterprises. If you’re collecting payments through UPI, you can finally relax, as there won’t be any extra tax liabilities tied to these transactions. The UPI framework provides:
- Effortless invoice payments
- Speedy settlements
- Digital records that are all set for GST in your accounting
If you’re a larger company using UPI APIs or payment gateway integrations, it’s crucial to consider GST on UPI transactions, even though small UPI transfers are still tax-exempt. These businesses may face platform or service fees that could include GST. The good news is that, per GST regulations on UPI transactions, these fees are classified as input services, which allows eligible companies to claim input tax credits.
International Angle: How Is UPI Taxed Globally?
Social Media and Misinformation Trends
The misleading GST claims started circulating in WhatsApp groups and on X (previously known as Twitter), rapidly picking up steam until they were officially disproven. Fact-checking websites and government accounts like @PIBFactCheck stepped in with prompt clarifications.
What the Public Can Do?
We encourage consumers to check the validity of these claims by consulting:
- Government press releases
- Official announcements from NPCI or RBI
- Reliable news platforms
- Tax consultants for tailored business inquiries
Government Incentives for UPI Usage
To foster greater adoption of UPI and alleviate concerns surrounding GST on UPI transactions, the government has allocated ₹1,500 crore for the fiscal year 2024–25 through the Digital Payments Incentive Scheme. This funding aims to cover the expenses incurred by payment service providers for P2M (person-to-merchant) transactions, ensuring that both consumers and merchants can keep enjoying services without fees while being informed about the GST implications on UPI transactions.
video credit Think School YouTube Channel
Final Thoughts—UPI Stays a Zero-Tax Payment Channel
Key Takeaways
There’s no GST applied to UPI transaction amounts.
- GST might only come into play for optional, premium services tied to business use.
- The Merchant Discount Rate (MDR) for P2M UPI transfers is still waived, meaning no GST applies here.
- Government incentives are in place to ensure that low-cost adoption remains possible.
- UPI’s tax status is in line with global standards. For UPI to evolve into a global payments model, having clear taxation and regulatory frameworks is key.
The Indian government’s announcement, scheduled for April 2025, clears up any confusion and promotes innovation and inclusion in the digital finance world.
