Government considering 18% GST on UPI payments over ₹2000? Here is the fact behind the baseless claim

A claim is made by some media houses and social media users that the Union government has proposed imposing GST on UPI transactions. As per the claims, there will be 18% GST on UPI transaction values above ₹2000. ET Now published a report titled “GST on UPI payments or transactions above Rs 2000? What experts argue” on 18 April, fuelling the rumours.

Subsequently, several anti-BJP social media users circulated the claim on social media, attacking the government for imposing yet another burden on taxpayers.

A post by user @IndianGems_ claiming the same was widely shared by several users on 𝕏, including pro-AAP handle Kapil (@kapsology). Sharing the now-deleted tweet, Kapil wrote, “Only people with white money use UPI for payments. That money has already been taxed by the government before they can spend it. They also pay GST on the product/Service they’re purchasing via UPI Now, the government wants to charge GST on the UPI transaction itself as well.”

‘Crypto Educator’ Sumit Kapoor shared the ET Now report, adding that “The change will drastically impact daily spending, especially for small businesses, freelancers, and middle-class families.”

While social media users have started outrage over the so-called GST proposal, the fact is the ET Now report is nothing but speculation, and the report does not quote any govt source over the ‘proposal’, and calls it a ‘hypothetical situation’. The report itself states in the first paragraph, “But what will you do if a GST of 18 per cent is charged on transactions, will you continue using UPI for daily payments or return to cash? Well, that seems to be a hypothetical situation as of now, considering that way government is promoting digital economy and the scale of UPI in our country.”

It then states, “GST on UPI is the talk of the town after multiple reports started are doing the rounds that GST will be imposed on UPI payments or transactions above Rs 2,000.”

But the fact is, this is complete misreporting by the so-called business and finance portal, as there was never any talk of imposing GST on UPI transactions above ₹2000. Even if any GST is charged, it will be charged on the service charge on UPI payments, not on the transactions themselves.

Notably, payment aggregators charge a fee ranging from 0.5% to 2% on cashless transactions like credit card payments, which is called the Merchant Discount Rate. But it is not applicable to UPI payments yet. Rupay credit cards are also exempt from this fee now. While there is a proposal to bring MDR on UPI payments too, so that the UPI service providers can recover their cost, this has not been implemented yet.

Notably, there is a 1.1% service charge on certain specific UPI transactions above ₹2,000, not all. The fee is applied for payments made through prepaid payment instruments (PPIs) like wallets or credit cards linked to UPI. This fee is payable by the merchant, not by the consumer.

Therefore, when a customer makes a payment above ₹2000 using wallets or credit cards through UPI apps, the payment aggregators charge a 1.1% fee from the merchant, the same as the fee charged for credit card payments. As this is a service charge, 18% GST on it becomes applicable, the rate for services under the GST regime.

At present, there is no service charge on other UPI payments, and therefore, there is no question of GST on them. Notably, as per the govt, less than 1% of UPI payments are made using wallets or credit cards; therefore majority of payments, over 99.9%, are exempt from any service charge.

The rules make it clear that customers don’t have to pay any charge for both Peer to Peer (P2P) and Peer to Merchant (P2M) transactions. P2P transaction means money transfer between two individuals using UPI, not involving any business transaction.

At present, there is an exemption from paying GST for digital payments below ₹2000. However, the GST council last year proposed to impose 18% GST on MDR of transactions below ₹2000 made using Debit and Credit card. But the proposal has not been implemented yet. There is no proposal for imposing MDR on UPI payments, and therefore, there is no proposal for GST on them.

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