New Delhi. Amidst the encouraging news of UPI transactions reaching a record Rs 260.56 lakh crore in the last financial year, as soon as people came to know that the government is preparing to levy GST on UPI transactions of more than Rs 2,000, everyone was disappointed. The anger of the users was clearly visible on social media. The matter escalated so much that the Finance Ministry itself had to come and explain the whole matter.
The Finance Ministry issued a clarification on Friday stating that the government has no intention of imposing GST on UPI transactions of more than Rs 2,000. Such news going viral on social media is completely false, misleading and without any basis. It has been made clear that no GST of any kind is being levied on UPI.
GST will be levied on MDR
The Finance Ministry further said that GST is levied only on the Merchant Discount Rate (MDR) levied on payments through certain instruments such as credit cards etc. The Finance Ministry said that from January 2020, the Central Board of Direct Taxes (CBDT) has removed MDR on person-to-merchant (P2M) UPI transactions. Since, currently no MDR is levied on UPI transactions, hence no GST is applicable on such transactions.
Our aim – to promote UPI
The ministry has stated in its clarification that an incentive scheme is in operation from the financial year 2021-22 to support and sustain the development of UPI. This scheme specifically encourages low-value UPI (P2M) transactions, so that small merchants can get relief in transaction costs and increase wider participation in digital payments.
UPI is growing at a record pace
UPI transactions in India are growing at a record pace. While the total UPI transaction was Rs 21.3 lakh crore in the financial year 2019-20, it has reached Rs 260.56 lakh crore in the last financial year ending in March. In this, the transaction done from person to merchant has also increased to Rs 59.3 lakh crore.
The government is giving crores of discounts.
The Finance Ministry has said that instead of taking GST on UPI transactions, the government is giving more discounts on this payment. In 2023-24, Rs 3,631 crore was paid under the incentive scheme, while in the previous financial year, a grant of Rs 2,210 crore was given. This makes clear the government’s role in digital transactions and its intention to promote it.
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