The government has clarified that GST is not applicable on UPI transactions, including those exceeding ₹2,000. Here’s a detailed breakdown:
1. Merchant Discount Rate (MDR): GST is levied on service charges like MDR, which merchants pay to banks or payment processors for executing transactions. However, since January 2020, MDR has been removed for Person-to-Merchant (P2M) UPI transactions. Consequently, no GST is charged on these transactions.
2. Government’s Position: Recent rumors suggested that GST might be imposed on UPI transactions above ₹2,000. The Finance Ministry has dismissed these claims as false and misleading. There is currently no proposal to introduce such a tax.
3. UPI Incentive Scheme: To promote digital payments, the government has implemented an incentive scheme targeting low-value UPI transactions. This scheme benefits small merchants by eliminating transaction costs and encouraging wider adoption.
4. Impact on Users and Merchants: While individual users conducting UPI transactions are not directly subjected to GST, merchants may face GST on service fees associated with payment platforms. This could indirectly affect product or service prices.
If you’d like to explore more about the UPI Incentive Scheme or the government’s digital payment policies, let me know!
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