Relax UPI Users! No GST on UPI Payments Yet; No Official Announcement from Government: Get Fact Check Here

Social media platforms have been flooded with posts claiming that the Union government is planning to impose an 18% Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions above Rs 2,000. These claims have spread rapidly across WhatsApp, X (formerly Twitter), Instagram, LinkedIn, and Facebook, causing confusion among digital payment users. Those who make transactions daily through UPI platforms using popular services like Google Pay, PhonePe, Paytm, and others could face an additional tax. Is this true? Here is a fact check.

What is the Reality of GST Charges on UPI Transactions? Understanding Facts Here

A closer look at the matter reveals that these claims are completely false and misleading. The government has not issued any official announcement or notification about imposing GST on UPI transactions of any amount. Digital payments through UPI remain free for users, and no GST is charged on the money being transferred, whether for personal or commercial use.

The claim seems to have originated from a financial news report published in September 2024, following the 54th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman at Sushma Swaraj Bhawan in New Delhi. The report suggested that the GST Council had discussed a proposal to apply this tax on service charges collected by payment aggregators for UPI transactions under Rs 2,000. However, the decision has been deferred. The matter has been referred to the GST fitment committee for further review, and no final decision has been made yet.

No GST on UPI Transactions: Clarifying the Confusion About 18% GST

Here are the key points a UPI user should understand:

• There is no 18% GST being applied on UPI transactions under Rs 2,000 for users.
• Reportedly, the GST Council discussed applying GST on service charges, like MDR, collected by payment aggregators such as Google Pay, PhonePe, Paytm, and others for transactions below Rs 2,000, not on the transaction amount itself.
• The decision has been deferred and is under further review by the GST fitment committee. It has not been finalized yet.
• UPI transactions remain completely tax-free for users. Whether you transfer money or make payments, you do not pay any GST on the amount.
• The 18% GST mentioned in media reports, if ever implemented, would apply only to service fees charged by payment aggregators, not on the money you send or receive.
• Currently, no MDR is applicable on UPI payments, including those made through RuPay credit cards.

What is Merchant Discount Rate?

Merchant Discount Rate (MDR) is a fee typically ranging from 0.5% to 2% that payment processors charge on card payments. This fee is common for credit and debit card transactions. However, as of now, MDR is not applied to UPI payments. There have been discussions about introducing MDR on UPI to help service providers recover costs, but no such rule has been implemented yet.