Everything you need to know about GST on UPI Payments

Unified Payments Interface (UPI) has made everyday payments fast and effortless. Whether it’s paying friends, splitting bills or shopping online, digital transactions are now the norm. But with all this ease, a common question surfaces: Is there any tax on UPI transaction? 

Read on to clarify this common doubt. 

No. There is no GST on UPI transaction made between individuals or for regular merchant payments. You can continue to pay your friends and shop online using UPI without worrying about an added GST. So, you can easily send ₹50 or ₹50,000 using UPI without paying tax on UPI. 

However, what does get taxed is the service provided by payment apps or banks. This is not the actual transaction value. It can be a convenience fee or platform charges.

When does GST Apply in UPI Payments?

There is no GST on UPI transactions between individuals or for everyday merchant payments. You can use apps like Google Pay, PhonePe, Paytm or Razorpay to send money. The amount you transfer is not subject to tax. 

Also, there is no MDR (Merchant Discount Rate) on UPI or RuPay payments. The government removed it to encourage digital transactions. Since there’s no MDR, there’s no GST on UPI payment.

GST on UPI payment applies only if the app or bank charges a separate service fee. These are not regular charges and usually come with premium services or international transfers.

GST is charged only on the extra service fee and not on the UPI amount. This includes:

• Payment gateway or platform fees
• Currency conversion charges for international UPI
• Subscription or added features from the app

The GST rate on such services is 18%. If no fee is charged, GST doesn’t apply.

Impact on Customers, Merchants and Businesses

Here’s how GST on UPI transaction affects each group differently:

For Customers

• No GST on UPI transfers: Sending money or paying at shops through UPI stays completely GST-free. There is no tax on the transaction amount.
• GST only on paid services: If you use a premium feature like cross-border transfers or priority payments, GST at 18% is added only to that service fee.

For Merchants and Businesses 

• No GST on UPI transaction: Merchants do not pay GST on the payments they receive via UPI. The full amount is credited without deductions.
• GST applies on service fees only: If the platform charges a fee for tools or features, GST at 18% is applied to that fee. It is not levied on the payment value.
• Input tax credit for GST-registered businesses: Registered businesses can claim credit on the GST paid for these charges. This helps reduce their total tax outgo.
• Government incentives for small merchants: The government supports low-value UPI payments through incentive schemes. These help cover platform or processing costs.

Latest Update 2025 – No GST on UPI Transactions Above ₹2,000

As of April 2025, UPI transactions remain GST-free for individual users. The Government has confirmed that claims about GST on UPI payments above ₹2,000 are completely false. There is no proposal to impose GST on the transaction amount, whether the transfer is for ₹10 or ₹20,000. So UPI continues to be a fast, secure and tax-free way to make payments.

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FAQs on GST and UPI Transactions

1. Is there any tax on UPI transactions?

No, there is no GST on online transaction itself. However, your app or bank might charge a service fee. GST is applied only to that fee, not the transaction amount.

2. Is GST applicable on Google Pay?

Google Pay does not charge GST on regular UPI payments like sending money or paying bills. If you use a paid feature or premium service, GST may apply only to that fee.

3. What is the GST rate for online transactions?
The standard GST rate for digital services in India is 18%. This applies to service-related charges such as subscription fees, platform charges or added features.