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The Indian government has vehemently denied recent reports suggesting the imposition of Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding ₹2,000. In an official statement released on Friday, the finance ministry labelled these claims as “completely false, misleading, and without any basis,” effectively quashing the concerns that had begun to circulate among the public and financial stakeholders. The ministry's swift and decisive response underscores the government's commitment to maintaining the accessibility and affordability of digital payment methods, particularly UPI, which has witnessed exponential growth in recent years and has become an integral part of the Indian economy. This denial is crucial because the mere speculation of a GST levy on UPI transactions could have had a detrimental impact on the adoption of digital payments, especially among smaller merchants and individuals who rely on these platforms for everyday transactions. Such a tax could have been perceived as a barrier to entry, potentially discouraging users from embracing digital payment methods and reverting to cash-based transactions, thereby undermining the government's efforts to promote a cashless economy. The government's proactive stance in clarifying the situation highlights its awareness of the potential consequences of misinformation and its dedication to ensuring that policies and regulations are communicated accurately and transparently to the public. The emphasis on the falsity and baselessness of the reports serves to reassure users that the government is not considering any measures that would negatively impact the convenience and cost-effectiveness of UPI transactions. This commitment to maintaining the status quo is particularly important in light of the significant role that UPI plays in facilitating financial inclusion and empowering individuals and businesses across the country.
The finance ministry further clarified the existing tax framework surrounding digital payments, explicitly stating that GST is only applicable on charges such as the Merchant Discount Rate (MDR), which are relevant for specific payment methods. MDR is the fee charged by banks and payment gateways to merchants for processing debit and credit card transactions. However, it's crucial to note that the Central Board of Direct Taxes (CBDT) had already eliminated MDR on person-to-merchant (P2M) UPI transactions back in January 2020. This decision to eliminate MDR on P2M UPI transactions was a significant step towards promoting digital payments, as it removed a key obstacle for merchants who were previously hesitant to adopt these methods due to the associated costs. By absorbing the MDR burden, the government incentivized merchants to accept UPI payments, which in turn encouraged consumers to utilize digital payment options more frequently. The ministry's reiteration of the fact that no MDR is currently charged on UPI transactions reinforces the understanding that there is consequently no GST applicable to these transactions. This clarification is essential for dispelling any confusion or uncertainty that may have arisen from the misleading reports. It provides a clear and unambiguous message to the public that UPI transactions remain free from GST, ensuring that users can continue to transact digitally without incurring any additional tax burden. The government's emphasis on the existing tax framework also serves to highlight its consistent policy stance on digital payments, demonstrating a commitment to maintaining a stable and predictable regulatory environment.
The Unified Payments Interface (UPI) has experienced an extraordinary surge in popularity and usage, transforming the landscape of digital payments in India. The transaction values have skyrocketed from Rs 21.3 lakh crore in the financial year 2019-20 to a projected Rs 260.56 lakh crore by the end of March 2025, showcasing the remarkable growth trajectory of this platform. This exponential increase in UPI transaction values reflects the increasing adoption of digital payments across various segments of the Indian population. Factors contributing to this growth include the convenience and ease of use of UPI, the widespread availability of smartphones and internet connectivity, and the government's proactive efforts to promote digital transactions through various initiatives and incentives. The UPI platform has become an essential tool for individuals and businesses alike, facilitating seamless and secure payments for a wide range of goods and services. From small-value transactions at local shops to large-value payments for online purchases, UPI has emerged as the preferred mode of payment for millions of Indians. The government's recognition of the significant role that UPI plays in the economy is evident in its continued support for the platform through various measures. These measures include the implementation of incentive schemes aimed at encouraging the use of UPI, as well as the development of policies and regulations that promote a level playing field for all stakeholders in the digital payments ecosystem. The government's commitment to fostering the growth of UPI is crucial for ensuring the continued expansion of digital payments in India and for achieving the broader goal of creating a cashless economy.
To further incentivize and encourage the continued growth of UPI, the government has been implementing an incentive scheme since the financial year 2021-22. This scheme is specifically designed to target low-value person-to-merchant (P2M) UPI transactions, recognizing the importance of supporting small merchants who may be more sensitive to transaction costs. The primary objective of the incentive scheme is to support small merchants by absorbing transaction costs, thereby making it more attractive for them to accept UPI payments. By reducing the financial burden associated with digital transactions, the government aims to drive broader adoption of digital payments among small businesses, which play a crucial role in the Indian economy. The incentive scheme provides financial assistance to merchants who accept UPI payments, effectively compensating them for the transaction fees that they would otherwise have to bear. This support not only encourages merchants to adopt UPI but also helps to level the playing field with larger businesses that may have greater resources to absorb transaction costs. The government's focus on low-value P2M UPI transactions reflects its understanding of the importance of promoting digital payments at the grassroots level. By targeting small merchants, the government aims to reach a wider segment of the population and to encourage the use of UPI for everyday transactions. This approach is consistent with the broader goal of financial inclusion, which seeks to ensure that all individuals and businesses have access to affordable and convenient financial services.
In the last financial year, 2023-24, a substantial amount of Rs 3,631 crore was disbursed under the UPI incentive scheme, representing a significant increase from the Rs 2,210 crore disbursed in the previous financial year, 2022-23. In FY 2021-2011, the allocation was Rs 1,389 crore. These figures demonstrate the government's escalating commitment to promoting UPI-based digital payments and its willingness to invest significant resources in supporting the growth of this platform. The substantial increase in the incentive payout from year to year highlights the government's recognition of the effectiveness of the scheme and its dedication to expanding its reach to a larger number of merchants. The increased funding reflects the growing adoption of UPI and the increasing demand for financial assistance among small businesses. The government's willingness to allocate significant resources to the UPI incentive scheme underscores its belief that digital payments are essential for driving economic growth and financial inclusion. By providing financial support to merchants, the government is not only encouraging the adoption of UPI but also helping to create a more efficient and transparent payment system. The incentive scheme has been instrumental in leveling the playing field for small businesses, enabling them to compete more effectively with larger enterprises. The government's investment in UPI reflects its commitment to fostering a vibrant and competitive digital economy.
“The total incentive payouts under this scheme over the years reflect the government's sustained commitment to promoting UPI-based digital payments,” the ministry added, emphasizing the long-term vision for digital transformation. This statement reinforces the idea that the government's support for UPI is not a short-term initiative but rather a strategic investment in the future of the Indian economy. The government recognizes the potential of digital payments to drive economic growth, improve financial inclusion, and enhance transparency. By consistently investing in UPI and other digital payment platforms, the government aims to create a more efficient and inclusive financial system that benefits all citizens. The government's commitment to promoting UPI is not only evident in its financial investments but also in its policy decisions and regulatory initiatives. The government has actively worked to create a favorable environment for the growth of digital payments, removing barriers and promoting innovation. The government's long-term vision for digital transformation is based on the understanding that digital payments are essential for achieving sustainable economic growth and for improving the lives of all Indians. By embracing digital technologies, India can unlock its full potential and become a global leader in the digital economy.
The press release issued by the finance ministry also highlighted India's remarkable position in the global real-time payments landscape. According to the ACI Worldwide report 2024, India accounted for an impressive 49 per cent of worldwide real-time transactions in 2023. This statistic underscores India's dominance in the global digital payments market and its rapid adoption of real-time payment technologies. The fact that India accounts for nearly half of all real-time transactions worldwide is a testament to the success of UPI and other digital payment platforms. The government's proactive policies and regulatory environment have played a crucial role in fostering the growth of digital payments in India. The high adoption rate of real-time payments in India is also a reflection of the country's large and tech-savvy population. The increasing availability of smartphones and internet connectivity has enabled millions of Indians to access and utilize digital payment platforms. The ACI Worldwide report further validates the government's efforts to promote digital payments and its vision for a cashless economy. The report highlights the positive impact of UPI on the Indian economy and its potential to drive further economic growth. The government's continued support for UPI and other digital payment platforms is essential for maintaining India's leadership position in the global real-time payments market. By fostering innovation and promoting a favorable regulatory environment, India can continue to attract investment and drive further growth in the digital payments sector. The government's commitment to digital transformation is not only benefiting the Indian economy but also positioning India as a global leader in the digital age.
The government's swift and decisive response to the false reports regarding GST on UPI transactions is a testament to its commitment to transparency and its dedication to promoting digital payments in India. By clarifying the existing tax framework and reiterating its support for UPI, the government has reassured the public and maintained confidence in the digital payment system. The continued growth and adoption of UPI are essential for achieving the broader goals of financial inclusion and economic growth. The government's ongoing investment in UPI and other digital payment platforms reflects its long-term vision for a digital India. By embracing digital technologies, India can unlock its full potential and become a global leader in the digital economy. The government's commitment to digital transformation is not only benefiting the Indian economy but also improving the lives of millions of Indians. As UPI continues to evolve and expand, it will play an increasingly important role in shaping the future of the Indian economy. The government's continued support for UPI is essential for ensuring that it remains a safe, secure, and convenient payment option for all Indians.
Source: 'False, misleading': Government denies reports of levying GST on UPI transactions over Rs 2000