UPI Payments Over Rs 2,000 Will Stay GST-Free, Confirms Government

The Government of India has officially dismissed circulating rumors that claimed plans were underway to impose Goods and Services Tax (GST) on Unified Payments Interface (UPI) transactions exceeding Rs 2,000. In an official press release issued on Friday, the government firmly stated that these claims are "false, misleading, and baseless."

"There is no such proposal under consideration," the press release stated, emphasizing the baseless nature of the circulating information.

Understanding UPI's GST-Free Structure

Currently, UPI payments—especially those made to merchants—do not attract GST. This is largely because the Merchant Discount Rate (MDR), a charge typically levied on digital transactions, was removed for UPI and RuPay card payments to promote a cashless economy. The MDR removal was implemented back in January 2020. Since GST is applied on MDR, its absence means there is no GST either.

Government’s Push for Digital Payments

The government reaffirmed its commitment to driving the adoption of digital payments across India. To support this, a special incentive scheme has been active since 2021. Under this initiative, the government reimburses service providers for transaction processing costs, effectively promoting wider usage among consumers and merchants alike.

UPI Incentive Scheme Highlights:

• 2021-22: Rs 1,389 crore

• 2022-23: Rs 2,210 crore

• 2023-24: Rs 631 crore

These financial incentives are evidence of the government's strategic intent to foster a robust digital payment infrastructure.

Record Growth in UPI Transactions

Thanks to such initiatives, India has seen exponential growth in UPI usage. According to ACI Worldwide, the country accounted for 49% of all real-time digital payments globally in 2023.

Over the last five years, UPI transactions have surged more than 12-fold, from Rs 21.3 lakh crore in FY 2019-20 to a projected Rs 260 lakh crore by March 2025. Of this, merchant payments alone make up Rs 59.3 lakh crore, showcasing increasing trust and adoption by both businesses and consumers.

Latest UPI updates

Here are the latest updates on UPI (Unified Payments Interface) as of April 19, 2025:

Transaction Limits:

Revised Limits for Merchant Payments (P2M):

The Reserve Bank of India (RBI) has permitted the National Payments Corporation of India (NPCI) to revise UPI transaction limits for Person-to-Merchant (P2M) payments based on evolving user needs.1 This means that in the near future, you may be able to pay higher amounts to merchants for specific use cases.2

P2P Limits Remain Unchanged: The transaction limit for Person-to-Person (P2P) UPI transactions remains capped at ₹1 lakh.

Existing Higher Limits for Specific P2M Use Cases:

Even before this revision, higher limits were applicable for certain P2M transactions:

• ₹2 lakh for categories like capital markets, insurance, collections, and foreign inward remittances.3

• ₹5 lakh for tax payments, payments to educational institutions and hospitals, IPO applications, and payments under RBI Retail Direct schemes.

• Bank-Specific Daily Limits: Individual banks still have the discretion to set their own daily UPI transfer limits, which can range from ₹25,000 to ₹1 lakh for general transactions. Some banks may also impose weekly or monthly limits.4

• UPI 123Pay Limit Increased: For feature phone users utilizing UPI 123Pay, the transaction limit has been increased from ₹5,000 to ₹10,000 per transaction.5

• International UPI via QR Share & Pay Discontinued: NPCI has discontinued international UPI transactions via the 'QR Share & Pay' method, effective retroactively from April 4, 2025.6 Only live scans of QR codes at physical merchant locations abroad are now permitted.

Security Updates:

Deactivation of UPI IDs Linked to Inactive Numbers:

Effective April 1, 2025, UPI IDs linked to mobile numbers that have been inactive for an extended period or reassigned to a new subscriber will be deactivated.7 Users are advised to ensure their mobile numbers registered with their banks are active and up-to-date. Banks and Payment Service Providers (PSPs) are required to update their mobile number records weekly using the Mobile Number Revocation List/Digital Intelligence Platform (MNRL/DIP).8

Mandatory Consent for Numeric UPI IDs:

Explicit user consent is now mandatory for assigning numeric UPI IDs.9 This cannot be obtained during a transaction.

Collect Request Restrictions:

The "Collect Payments" feature on UPI is being eliminated for person-to-person transactions and will be restricted to large, verified merchants, with a cap of ₹2,000 for P2P collect requests.10 This is to address increasing fraud.

GST Clarification:

The Finance Ministry has clarified that there is no proposal to levy Goods and Services Tax (GST) on UPI transactions over ₹2,000.11 GST is levied on charges like the Merchant Discount Rate (MDR), which is not currently applicable to P2M UPI transactions.12

Other Key Updates:

• UPI Remains Free for Users: The majority of UPI transactions remain free for users. However, interchange fees of up to 1.1% may apply to UPI transactions above ₹2,000 made through Prepaid Payment Instruments (PPIs) like digital wallets.13

• UPI Transaction Growth: UPI continues to see significant growth in India.14 In March 2025, transaction values reached a record high of ₹24.77 lakh crore.15

• NPCI to Handle P2M Limit Revisions: NPCI, in consultation with banks and other stakeholders, will now be responsible for announcing and revising P2M transaction limits based on evolving user needs.16

It's important to note that individual banks and UPI apps may have their own specific rules and limits, so it's always a good practice to check with your bank or UPI provider for the most accurate information.

The Bottom Line

The clarification puts to rest widespread misinformation regarding GST on UPI transactions. With no GST or MDR on UPI payments, especially those above Rs 2,000, the government remains focused on strengthening the digital payments ecosystem and facilitating seamless, cost-free transactions for citizens.