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20 Feb, 2026
By Online Legal India
Published On 20 Feb 2026
Category GST
The Unified Payments Interface (UPI) has changed how people in India make transactions. However, understanding the GST on UPI transactions is essential for users. The person-to-person transfers are tax-free for digital payments. This means the government does not charge GST on it. Still, there are some rules for business. In this blog, you will get guidance on the GST rate on UPI transactions.
As per the latest guidelines, there is no GST on UPI transactions for users. This applies to person-to-person (P2P) or person-to-merchant (P2M) transactions. The Government of India stated that the UPI transfers are free. So, there is no GST applied to the transaction amount. The charges are included in GST in case the payment services charge any fees. The payment services can include Google Pay, PhonePe, Paytm, etc.
In 2024, there was a proposal to charge 18% GST on UPI service charges or transactions over Rs. 2,000. The GST Council has not put this into action.
Listed below are the key aspects of GST transactions:
An 18% GST is not charged to the money sent through UPI.
If a person sends UPI payments to friends, family, or merchants using a QR code, it does not have any service fees. This means it is free of service fees.
If a bank or payment service charges a fee for a service, only that fee (not the transaction amount) is attract a 18% GST.
The Ministry of Finance and Government officials confirm that reports about a new 18% GST on UPI transactions of more than Rs. 2,000 are not true.
Previously, the Merchant Discount Rate (MDR) is used to be charged on transactions. These transaction were removed from standard Unified Payments Interface (UPI) transactions. This became effective in January 2020. So, it is stated as zero-MDR policy for standard transactions.
Below is the table outlining the charges for GST on UPI transactions:
| Amount of Transaction | Transaction Fees | GST Applicability | Value of Supply | GST Rate |
|---|---|---|---|---|
| The amount is up to Rs.2,000 | The fees of transaction is not applicable | The GST is not applicable | It is generally not applicable | The GST rate is not charged |
| The amount is above Rs. 2,000 | A payment intermediary will charge a transaction cost. | Yes, the GST is applicable only on the transaction fees. | Payment gateway charges | 18% rate |
However, the GST will be charged on the fees from payment gateways. It will not be charged on the total amount of the transaction.
The Ministry of Finance currently states in a press release on 18th April 2025 that it will not charge GST on transaction amounts of more than Rs. 2,000. This applies to transactions between people and merchants. The government has also removed the merchant discount rate since December 2019. The merchant discount rate refers to transaction fees. This is because there is no value of supply. So, GST will not apply.
Merchants who are using UPI need to keep proper accounting records. This helps them to follow GST rules and other laws. Payments received through UPI can stated as a aggregate turnover by authorities. When a business gets any money that is not regular income, it must record these transactions. This will help to prevent future issues.
UPI is generally used for domestic transactions. Recently, people can use it for getting payments from cross-border countries. In such a transaction, a business usually has to pay two costs. One for the payment aggregator and another for currency conversion. The respective banks tax these fees. Thus, GST includes both of these fees.
Conclusion
To sum up, there is no GST on UPI transactions for regular users. UPI is considered as an essential tool to make payments without any extra costs. Merchants may have some fees, but the government encourages digital growth. So, a person-to-person (P2P) and merchant payments remains zero-tax, which is free. Thus, you must always stay informed on the Latest GST rules and changes. If you need assistance regarding GST, get in touch with Online Legal India.
FAQ
Q1. Is there any GST on UPI Transaction?
No, there is no GST on UPI transaction.
Q2. How is GST on UPI Transaction services calculated?
As there is no GST on UPI transactions for individual users (P2P) by the government. This only applies to the goods or services purchased. In case of the businesses, the 18% rate may apply to the Merchant Discount Rate (MDR). It may also applies to the service fees charged by providers.
Q3. Is there GST on UPI transactions for amounts above Rs.2,000?
No, there is no GST applicable to UPI transaction for the amounts above Rs. 2,000. The Indian Government has stated that the rumours about a 1.1% or 18% GST on these transactions are completely false and misleading.
Q4. What are the UPI transaction limits?
The limits of the UPI transaction are up to Rs. 1 lakh per day.
Q5. Is it important for merchants to track UPI transactions for GST compliance?
Yes, it is important for merchants to track UPI transactions for GST compliance.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.
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