GST on UPI Payments: Applicability, Charges and Exemptions
Unified Payments Interface (UPI) has become one of the most preferred digital payment options for both everyday users and small businesses. Its popularity stems from its simplicity, instant transfers, and the various cashback and reward offers it provides. Recently, UPI has drawn attention again due to discussions around the possible imposition of GST on UPI-related transactions.
Although UPI itself continues to remain free from tax, this article explains how GST applies to service charges connected with UPI usage, the exemptions available, and the latest policy updates in India.
Is GST Applicable on UPI Transactions?
UPI payments do not attract GST, regardless of the transfer amount or whether the payment is made between individuals (P2P) or between a customer and a business (P2M).
However, if payment aggregators—such as Razorpay, PhonePe, Google Pay, or Paytm—charge any service fee, such charges fall within the GST framework.
A proposal was discussed in 2024 to apply 18% GST on UPI service charges for transactions exceeding ₹2,000, but the GST Council has not implemented this change yet.
GST on UPI Transaction Charges
| Transaction Amount | Transaction Fees | GST Applicable? | Value of Supply | GST Rate |
| Up to ₹2,000 | Not Applicable | Not Applicable | Not Applicable | Not Applicable |
| Above ₹2,000 | May be charged by payment intermediaries | Yes, on the transaction fees | Payment gateway charges | 18% |
It is important to understand that GST applies only to the payment gateway fees charged by aggregators, not on the transaction amount itself.
Exemption on UPI Transactions
A recent press release issued by the Ministry of Finance on 18/04/2025 clarified that the government has no plan to impose GST on person-to-merchant UPI transactions above ₹2,000. The merchant discount rate (MDR), commonly known as transaction fees, was removed back in December 2019. As there is no taxable value of supply, GST does not apply.
GST Compliance for Businesses Using UPI
Businesses that accept UPI payments must keep accurate books as required under GST and other applicable regulations. Payments received through UPI generally form part of the aggregate turnover assessed by authorities. If a business receives any amount that is not income or turnover, it must keep clear documentation to avoid disputes. A recent instance involved a street vendor who received a GST notice because his total UPI receipts exceeded ₹40 lakhs.
GST on International UPI Transactions
UPI, which earlier supported only domestic payments, can now facilitate receipts from foreign countries as well. Such transactions usually involve two types of charges: transaction fees from the payment aggregator and currency conversion charges from banks. Both these cost components fall under the purview of GST.
How Does GST Impact UPI Users and Merchants?
According to the Ministry of Finance, the Government currently has no plans to impose merchant discount rates or platform charges on UPI, which means GST is not applicable at present.
If, in the future, merchant discount rates are introduced on UPI transactions, it would lead to an added cost for users. For example, if someone pays a vendor ₹20,000 and a 1.5% merchant discount rate or platform fee is applied, the total additional cost (including 18% GST) would come to ₹354. This means the individual would end up paying ₹20,354. This structure is similar to how charges apply on credit card payments.
For GST-registered businesses making payments to suppliers through UPI, the GST charged on platform usage fees can be claimed as input tax credit. However, the merchant discount rate or platform fee itself would still remain an extra expense for the business.
Frequently Asked Questions – GST on Google Pay & UPI Transactions (Updated)
1. Is GST applicable on Google Pay transactions?
No, GST is not applicable on UPI transactions made through Google Pay. UPI payments are completely free for users. However, if Google Pay ever charges any platform or service fee, such fees will attract GST as per standard rules.
2. Do UPI users pay any tax on their transactions?
No. Since UPI does not involve any transaction fee, there is no GST or tax on UPI transactions for users.
3. How can merchants claim GST input tax credit on UPI charges?
If payment aggregators levy any platform or convenience fees, GST-registered merchants can claim the GST paid on such charges as ITC, provided the expense is used for business purposes.
4. How is GST on UPI payment services calculated?
GST is applied only on service or platform fees charged by payment aggregators — not on the transaction amount itself.
5. Are there any GST charges on UPI payments below ₹2,000?
No. Since there is no transaction fee, UPI payments below ₹2,000 (and above ₹2,000) do not attract GST.
6. Does the government charge GST on UPI infrastructure or usage?
No. The government absorbs the infrastructure cost under the UPI Incentive Scheme and does not levy GST on UPI usage.
7. What are the current UPI transaction limits?
Most banks allow UPI transactions up to ₹1 lakh per day. Some categories (like healthcare, education, or specific merchant payments) may have enhanced limits set by NPCI.
8. How much of a UPI transaction is taxable?
Only platform usage charges, if imposed, are taxable under GST. The UPI transaction amount remains non-taxable.
9. Is there GST on peer-to-peer (P2P) UPI transfers?
No. P2P UPI transfers (e.g., sending money to friends or family) are fully exempt, regardless of transaction value.
10. What are the RBI guidelines for UPI transactions in 2025?
RBI has mandated:
- Banks and payment aggregators must update linked mobile numbers weekly.
- UPI IDs linked to inactive mobile numbers (typically inactive for more than 90 days) will be deactivated.
11. Are merchant UPI payments charged under GST?
Merchant payments are not charged GST unless the payment service provider levies a convenience fee.
12. Are wallet-to-bank or bank-to-wallet transfers taxable?
If any service fee is charged by the payment provider, GST applies on the service fee, not on the transfer amount.
13. Is GST applicable on UPI AutoPay mandates?
No GST is applied on the UPI AutoPay transaction itself. However, GST may be applicable on the service or subscription being paid for.
14. Do international UPI payments attract GST?
Cross-border UPI services may involve forex conversion charges, and GST may apply only on such charges—not on the UPI transfer.
15. Will GST apply if UPI introduces merchant discount rates (MDR) in the future?
Yes. If MDR is reintroduced, GST will apply on the MDR fee, increasing the cost for merchants.
