18% GST on UPI Transactions Above Rs 2,000? Govt Issues Clarification on Rumors

There have been rumours circulating around the possible imposition of goods and services tax (GST) on Unified Payments Interface (UPI) transactions exceeding Rs 2,000. However, the government has dismissed the 18% GST claims, calling them “completely false, misleading, and without any bias”.

In a post on X (formerly Twitter), the Central Board of Indirect Taxes & Customs (CBIC) clarified that there is no such proposal before the central government. It stated that GST is applicable on charges like the Merchant Discount Rate (MDR) associated with payments made through specific instruments.

“The claims that the Government is considering levying GST on UPI transactions over Rs 2,000 are completely false, misleading, and without any basis. Effective January 2020, the CBDT has removed the MDR on Person-to-Merchant (P2M) UPI transactions through the Gazette Notification dated 30th December 2019,” the CBIC post read.

According to the government, since MDR is not charged on UPI transactions at present, consequently, there is no GST applicable to these transactions. It assures that the government remains committed to promoting digital payments via UPI.

Last month, Prime Minister Narendra Modi had approved a Rs 1,500-crore incentive scheme to promote low-value BHIM-UPI P2M transactions for small merchants. Under this scheme, all person-to-merchant (P2M) transactions up to Rs 2,000 for small merchants will qualify for zero Merchant Discount Rate (MDR) and an incentive of 0.15%. This scheme will be implemented for one year between April 1, 2024, and March 31, 2025.

UPI Transactions Surge

UPI saw a 13.6% increase in transaction volume in March, reaching 18.30 billion transactions. The top five UPI apps, PhonePe, Google Pay, Paytm, Navi and Super.money, maintained their rankings.

IPO‑bound fintech start-up PhonePe retained its leading position in the UPI market in March, processing 864.7 crore transactions, accounting for 47.25% of total UPI transactions. On a month‑over‑month (MoM) basis, this reflected a 0.28% decrease in market share from 765.6 crore transactions.

PhonePe handled a total transaction value of Rs 12.57 lakh crore during the month. In terms of transaction value, the Walmart‑backed fintech company accounted for 50.74% of the total UPI transaction volume in March 2025.

CRED slipped to seventh place, overtaken by Axis Bank. This follows a similar shift in February when Super.money displaced CRED from the top five rankings. According to NPCI data, Axis Bank surpassed CRED by recording 125 million B2C transactions in March. B2C (business‑to‑customer) transactions in the UPI system refer to payments made by businesses to customers, such as refunds, salaries or rebates.

Overall, UPI transactions in the country hit a new high of 18.30 billion in March, recovering from a 5% drop to 16.11 billion in February. March's transaction value totaled Rs 24.77 lakh crore, a 12.8% month‑on‑month (MoM) increase from Rs 21.96 lakh crore in February.