The Indian government has dismissed rumours of GST on UPI merchant discount rate payments, reaffirming that UPI transactions remain free for most users despite ongoing discussions about introducing transaction fees for higher-value payments.
India’s finance ministry has moved to cool speculation around UPI charges, saying there is no GST on merchant discount rate payments because no MDR is currently being levied on the country’s instant payment system. Government sources told The Economic Times that the tax does not create net revenue for the exchequer because businesses can claim input tax credit against it, while the broader charge itself is not in force on UPI today.
The clarification comes amid renewed debate over whether UPI, which has become the backbone of India’s digital payments system, could eventually carry fees for some transactions. Mint has reported that the government has confirmed UPI will stay free for consumers and small merchants, with any future MDR, if introduced, likely limited to selected higher-value merchant payments and set at a nominal rate well below typical card charges.
That possibility has been discussed against the backdrop of concerns over how to fund the fast-growing payments infrastructure. Mint reported that a parliamentary standing committee on finance has urged a calibrated, tiered MDR structure for larger merchant transactions, while protecting small businesses and person-to-person transfers. Bernstein, cited by Mint, has said consumers are unlikely to bear the cost even if MDR returns, with a merchant-funded charge of 30 to 40 basis points seen as the most likely outcome.
Officials have also pushed back on claims that any such move is being driven by outside pressure. The Economic Times reported that government sources dismissed those suggestions and said rumours about GST on UPI payments above ₹2,000 were false and misleading. Business Standard similarly reported that the finance ministry has said the claims were “completely false, misleading and without any basis”, reinforcing the government’s public line that UPI users should not face new charges for everyday payments.
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