GST on UPI Transaction in 2025: What You Really Need to Know

UPI is the lifeblood of millions of Indians, with the increasing popularity of digital transactions. In June 2025, only ₹24 lakh crores were transacted via UPI. Even global financial institutions like the International Monetary Fund (IMF) have acknowledged the success of UPI. 

But have you ever thought about whether GST on UPI transactions is applicable to your payments? The misunderstanding of this matter is due to hype on social media. Since UPI is easier and faster to make payments, the question that comes to the minds of many of us is whether the online payments are going to come under the purview of GST, or is there some misunderstanding? 

Does it apply to all payments, or to only some? We know you must be having such questions in your mind. Don’t worry, we will try to answer them all. 

In this blog, we will discuss the truth behind GST on UPI transactions and what steps the government may take in the future. 

Why Is Everyone Talking About GST on UPI?

You have been observing how UPI has turned your preferred mode of payment in India. Whether it is purchasing fruits in your neighbourhood market or paying your Ola driver, it is all over.

It is rumoured that the government was to impose an 18%GST on UPI payments of more than ₹2,000 a couple of weeks ago. Social media went crazy. You might have asked yourself, ‘Will I have to pay more for my Swiggy orders?’ The Finance Ministry stepped in and released the following statement: 

“There is no recommendation of levying GST on UPI transactions of over ₹2000 from the GST Council,” said Pankaj Chaudhary, Minister of State of Finance, during the Rajya Sabha monsoon session.

The Finance Ministry was quick to respond, describing such assertions as being totally false and misleading. 

They made it clear that the GST on UPI transactions is not under consideration currently, certainly not on the amount of the transaction.

However, here is the twist: even though UPI transactions are not under the purview of GST, the service charges by payment aggregator/apps such as PhonePe, Google Pay, or Paytm may be taxable under GST. 

In 2024, a proposal to levy GST at 18% on any transaction above 2,000 rupees was floated, but this has yet to be approved.

Here is the proposed GST to be levied on UPI transactions:

Transaction Amount	Mode of Transaction	GST Applicable?
Any amount	P2P or P2M	No
Over ₹2000	P2M (Via payment aggregator)	Not yet decided

Busting Myths About GST on UPI

With so much noise on social media, it’s easy to fall for myths. Let’s clear up a few so that you can carry out day-to-day transactions without worrying: 

Myth: GST will be charged on every UPI transaction above ₹2,000.

Fact: No GST applies to the transaction amount. Service charge levied by a payment aggregator may come under the purview of GST; however, the decision is still pending. 

Myth: Personal UPI transfers (like sending money to family) will attract GST.

Fact: GST is not on Peer-to-peer (P2P) transfers

How Could GST on UPI Affect You?

Let’s assume for a second that GST gets applicable on UPI transactions. You must be wondering, you’re probably wondering, “How does this impact my daily life?” Whether you’re a student, a salaried employee, or a small business owner, here’s how GST on UPI could play out: 

For Everyday Users 

Imagine you are in Bangalore in a mall, and you are about to pay ₹3,000 to buy a pair of sneakers using UPI. In case the shop is using a payment aggregator such as Paytm, they may have to pay a small service fee. In case GST is imposed on that fee, the shop may transfer the cost to you by making that price a bit higher. Annoying, right? 

However, this is a possible solution, which is that you can divide the payment into two transactions of 1500 rupees each to keep it below the 2000 rupee limit. 

But wait, you don’t have to stress over it now, because the final decision is yet to be made. 

The implementation of GST varies across sectors — check out the GST applicable on restaurant food items to understand how it works in the food service industry.

For Small Businesses and Freelancers

Small companies and gig workers use UPI to receive payments conveniently and in a short time. 

In case GST on service charges comes into effect, they will have to:

• Maintain better records: Keep a record of every UPI transaction in order to comply with the GST rules.

• Monitor their charges: Payment aggregators may increase their fees to cover GST, which will reduce margins.

• Other options: People may opt to use direct bank transfer to prevent the charges, but it takes longer to reflect the transaction in the bank account and is not as convenient as UPI. 

Will the Government Impose GST on UPI in the Future?

As of July 31, 2025, UPI transactions will not be subject to GST.

The government has been promoting digital payments, and taxing the same would contradict that move. Both the RBI and the NPCI have reiterated that UPI must be affordable and have a wide reach.

Thus, chances of levying GST on UPI transactions are less likely. 

Closing Notes 

As of July 31, 2025, GST on UPI transactions is just a rumour. However, 18% GST may be applicable on service charges. Whether you are a UPI user who uses it daily or a business owner, staying informed is your superpower. UPI has changed the way we do transactions in India. Let’s hope it stays like that.

Frequently Asked Questions

1. Is GST charged on UPI payments?

No, UPI payments themselves do not attract GST.

2. Is there GST on UPI payments below ₹2000?

No GST is levied on the UPI payment mode itself, irrespective of the amount. 

3. Will I pay extra if I use UPI for a transaction above ₹2000?

Not for using UPI. But service fees (like convenience charges) may have GST applied. Still, it has not come into effect yet. 

4. Are merchant UPI transactions taxed differently?

Not from the customer side. Merchants may pay backend charges with GST to their payment service provider.

5. Can GST change on UPI in the future?

Basic transaction service should remain GST-free. But there could be GST on value-added services.