No GST on UPI Payments in 2025 | Govt Clarifies Rumors

No GST on UPI Transactions: Here's the Real Deal in 2025

Lately, there’s been a buzz on social media: "GST will be charged on UPI payments over ₹2,000." Sounds scary, right? But here’s the thing — it’s simply not true. The government has officially said there's no GST on UPI transactions, and that isn't changing anytime soon.

Government Says: No GST on UPI

In a press release dated April 18, 2025, the Ministry of Finance made it crystal clear:

There is no proposal before the Government to levy GST on UPI transactions.

That puts an end to the rumor. UPI transactions remain completely tax-free for consumers and small merchants alike.

Why There's No Tax on UPI Transfers

Let’s break it down:

GST applies only on services or charges.
Earlier, a small fee called MDR (Merchant Discount Rate) was charged for UPI Person-to-Merchant payments.
But in January 2020, the government scrapped MDR for these UPI transactions.
No MDR means no service, and no service means nothing to tax.
So your regular UPI scan-and-pay? Still free.

The Government's Way of Keeping UPI Free

To support the zero-cost model, the government pays banks and payment apps for handling small-ticket UPI payments through the UPI Incentive Scheme.

Here’s how much they set aside for that purpose over the years:

2021-22: ₹1,389 crore
2022-23: ₹2,210 crore
2023-24: ₹3,631 crore
2024-25: ₹1,500 crore

And for the year 2025-26? It’s come down to ₹437 crore. The goal is to help the system move towards self-sufficiency.

UPI's Growth Story: By the Numbers

If you’ve ever wondered how big UPI has become, here’s a snapshot:

UPI transaction value rose from ₹21.3 lakh crore in 2019-20 to over ₹260 lakh crore by March 2025.
Person-to-Merchant transactions reached nearly ₹60 lakh crore.
In March 2025 alone, the system processed over ₹24 lakh crore in transactions.
According to ACI Worldwide, India handled 49% of the world’s real-time digital payments in 2023.

So What Might Happen Later?

Right now, there’s no GST or MDR on UPI. But the government is exploring whether large businesses doing high-value transactions (above ₹3,000) should pay a small MDR. Still, there’s no formal decision on this. It’s just something they’re discussing.