Government Denies Plans for GST on UPI Transactions Above ₹2,000; Debunks Misleading Claims

New Delhi, India - In an important development that puts an end to speculations, the Indian government has noted there will be no imposition of Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions, irrespective of the amount transacted. It has been clarified by the Finance Ministry that there is no truth to the claims that there will be a GST on UPI transactions of more than ₹2,000. The government has shown a continuous and unwavering stand of both encouraging and facilitating digital payments in India, where the UPI payment system serves as one of the primary tools. It has been noted that GST is not charged on payment methods like UPI, NEFT, or IMPS. It only applies when there is a supply of goods or services. In that sense, UPI transfer is merely a payment method and not a taxable transaction.The confusion recently seems to have come from instances when the tax authorities, especially from the state of Karnataka, tracked UPI transaction data to pinpoint unregistered businesses whose revenue crossed the GST threshold. These were served to them for potential GST liability concerning tax evasion and not due to non-compliant tax on UPI transactions. As the Finance Ministry has clarified, GST is charged on UPI transaction fee payments like Merchant Discount Rate (MDR) but the government removed MDROn P2M (MDR) UPI transactions effective from January 2020. Subsequently, since no MDR is levied, no GST is chargeable on these UPI transactions. The government has also reiterated that no such proposal has been made by the GST council. UPI users for P2P payments as well as for goods and services payments will not be subjected to any additional charge of GST as a consequence of using the payment method.New Headline: UPI Transactions GST-Free: Government Removes Tax on Payments Over ₹2,000