Unified Payments Interface (UPI) has transformed how businesses and individuals handle payments today. Whether it’s buying groceries, paying utility bills, or transferring money to vendors, UPI has made digital transactions simple, fast, and widely accessible.
As the use of UPI continues to grow, there has been some confusion around one key topic: GST on UPI transactions. Do UPI payments attract GST? If yes, who needs to pay it? And what recent changes should businesses and users be aware of?
Here’s a clear breakdown of how GST applies to UPI transactions and what it means for businesses and individuals.
Does GST Apply to UPI Transactions?
The short answer: No, GST is not charged directly on UPI transactions made by users. When someone sends or receives money via UPI, there is no separate GST levied on that transfer itself.
As of April 2025, there is no truth to the claims that the Government is planning to impose Goods and Services Tax (GST) on UPI transactions exceeding ₹2,000. Such statements are misleading and have no factual basis. At present, no such proposal is under consideration by the Government.
However, GST is already included in the goods or services you are paying for. For example, if you buy a laptop and pay via UPI, the product’s price includes applicable GST. But the act of paying through UPI does not attract any additional GST.
Confusion often arises because of the service charges related to certain kinds of digital payments. But for a normal UPI payment — whether it’s P2P (person-to-person) or P2M (person-to-merchant) — there is no extra GST applied at the transaction level for customers.
GST on UPI: Who is Affected?
While customers are not charged GST on UPI transactions, businesses and payment service providers do have some GST-related obligations. Here’s how it works:
- Banks and Payment Service Providers: If banks or third-party apps charge a fee for facilitating certain UPI payments (especially large-value transactions or special merchant services), GST may apply to those service charges.
- Merchants: If a business accepts payments via UPI, it must continue to comply with regular GST norms on its goods or services. The mode of payment does not change the GST liability of the business.
- Wallet-based UPI Payments: With the growing use of wallets linked to UPI, if users make merchant payments using pre-loaded wallets instead of direct bank accounts, there could be small service charges. GST can be applied to these charges, not to the transaction value.
In short, businesses and payment operators might deal with GST on charges related to services they provide. Regular users making or receiving payments usually don’t have to worry about it.
Charges on UPI Payments and GST
While UPI payments between individuals remain largely free, certain merchant transactions are seeing changes.
The National Payments Corporation of India (NPCI) introduced an interchange fee of up to 1.1% on some high-value merchant UPI transactions (over ₹2,000) made through prepaid payment instruments (PPIs) like wallets. These fees are charged between payment providers (wallets and banks) and are not directly imposed on customers. However, merchants might indirectly bear these costs and may adjust their product prices accordingly.
Here’s where GST comes into play:
- The interchange fee charged to the merchant may have GST applicable on it, and this is handled at the B2B level (i.e., among payment providers or by the merchant, not the end customer).
- Payment service providers may also apply a small service fee to the merchants, and GST would apply to that fee.
Again, individual users transferring money from one bank account to another through UPI do not face these charges.
For businesses accepting UPI payments via wallets, understanding this fee structure is important. If service fees apply, GST will be calculated on those fees — not on the customer’s transaction amount.
Recent Updates and Government Clarifications
Over the years, the government has taken several steps to encourage digital payments and remove additional costs for users and businesses. One major move was the removal of Merchant Discount Rate (MDR) on Person-to-Merchant (P2M) UPI transactions. Through a Gazette Notification issued on 30th December 2019, the Central Board of Direct Taxes (CBDT) made it official that, effective January 2020, no MDR would be applicable on P2M UPI transactions.
As of 2025, there have been no major changes in the GST treatment of UPI transactions for individual users. Authorities have also clarified that the government is not considering any proposal to impose GST on UPI transactions above ₹2,000. Claims suggesting otherwise are inaccurate and without any basis.
NPCI’s circulars and RBI’s updates continue to focus on maintaining transparency and affordability in digital payments. Businesses accepting UPI payments must, however, keep an eye on wallet-based transactions, where service fees and related GST could apply.
Final Thoughts
To sum up, for everyday users, there is no GST applied directly on UPI transactions. Payments made through UPI for buying goods and services include GST only in the product or service price — not in the payment method.
For businesses and payment service providers, service fees connected to UPI transactions (especially wallet-based) might attract GST. Ensuring proper documentation and compliance with the latest updates is key.
As digital payments continue to evolve, understanding these nuances around GST on UPI transactions helps businesses make informed decisions and avoid surprises. Whether you are a growing enterprise or an individual making quick payments, UPI remains a safe, efficient, and cost-effective choice.
