Dikhyaa Mohanty 
On Friday, the Finance Ministry clarified that any proposal to impose the Goods and Services Tax (GST) on UPI transactions above Rs 2,000 is not being considered by the government. GST is applied to fees associated with payments made with specific instruments, including the Merchant Discount Rate (MDR). By means of the Gazette Notification dated December 30, 2019, the Central Board of Direct Taxes (CBDT) eliminated the MDR on Person-to-Merchant (P2M) UPI transactions as of January 2020. According to the Ministry, there is presently no GST applied on UPI transactions because there is no MDR imposed on them.
The government is still dedicated to encouraging UPI-based digital payments. From FY 2021–2022, an incentive scheme was in place to help and maintain UPI’s development. According to the official release, this program primarily targets low-value UPI (P2M) transactions, which benefits small businesses by lowering transaction costs and encouraging greater involvement and innovation in digital payments. The government’s ongoing commitment to advancing UPI-based digital payments is reflected in the overall incentive awards under this system over the years, the statement noted. Rs 1,389 crore for FY2021-22, Rs 2,210 crore for FY2022-23, and Rs 3,631 crore for FY2023-24 are among the allocations made under the initiative over the years.
These actions have made a substantial contribution to India’s thriving digital payments system. India reaffirmed its position as a worldwide leader in digital payments innovation in 2023, accounting for 49% of global real-time transactions, according to the ACI Worldwide Report 2024. From Rs 21.3 lakh crore in FY 2019–20 to Rs 260.56 lakh crore by March 2025, UPI transaction values have increased exponentially. According to the statement, P2M transactions have surpassed Rs 59.3 lakh crore, which reflects rising merchant usage and customer trust in digital payment channels.
