Will GST be applicable on UPI above Rs 2000 or not, government gives clarification
Amidst the encouraging news of UPI transactions reaching a record Rs 260.56 lakh crore in the last financial year, there was speculation that the government may be preparing to levy GST on UPI transactions of more than Rs 2,000. The matter escalated so much that the Finance Ministry itself had to come and tell the whole thing.
The Finance Ministry issued a clarification on Friday and said that the government has no intention to impose GST on UPI transactions of more than Rs 2,000. Such news going on in the social media is completely false, misleading and is going viral without any basis. It has been made clear that no GST of any kind is being levied on UPI.
GST will be levied on MDR
The Finance Ministry further said that GST is levied only on the Merchant Discount Rate (MDR) levied on payments through some devices such as credit cards etc. The Finance Ministry said that from January 2020, the Central Board of Direct Taxes (CBDT) has removed MDR on person-to-business (P2M) UPI transactions. Since no MDR is currently levied on UPI transactions, no GST is applicable on such transactions.
Our aim – to promote UPI
The ministry has stated in its clarification that an incentive scheme is in operation from the financial year 2021-22 to support the development of UPI. The scheme specifically encourages low-value UPI (P2M) transactions, so that small merchants can get relief in transaction costs and increase wider participation in digital payments.
