Saturday, April 19, 2025

GST on UPI Transactions in India: What You Need to Know (2025 Update)

   No comments



GST on UPI Transactions in India: What You Need to Know (2025 Update)

Introduction

Unified Payments Interface (UPI) has revolutionized digital transactions in India. From tea vendors to large retailers, everyone uses UPI for quick, cashless payments. But with the rising use of digital payments, many are wondering—is there GST on UPI transactions in India?

In this blog, we’ll break down the truth behind GST on UPI payments, clarify common misconceptions, and share important 2025 updates that could impact individuals and businesses alike.

What Is UPI?

Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI). It enables instant money transfer between bank accounts via a mobile device. Popular UPI apps include:

  • PhonePe

  • Google Pay

  • Paytm

  • BHIM

  • Amazon Pay

UPI transactions are typically free for individuals, which is why it's grown rapidly across India.

Is There GST on UPI Transactions?

As of 2025, there is NO GST levied directly on UPI transactions made by individuals. If you're a consumer sending or receiving money using UPI, you’re not paying any Goods and Services Tax (GST) on that transaction.

Here's What You Should Know:

  1. No GST on Person-to-Person (P2P) UPI Transfers:
    Sending money to friends or family using UPI? No GST is applicable.

  2. No GST on Merchant Payments via UPI (for customers):
    If you're paying at a store or restaurant using UPI, you're paying only the GST included in the bill—not on the payment method.

  3. Banks and PSPs (Payment Service Providers) may be subject to GST:
    While customers are exempt, banks and service providers may be taxed on the services they offer (like transaction processing, infrastructure management, etc.).

Is There Any Charge on UPI Transactions?

UPI transactions remain free for retail customers under government policy. However, from April 1, 2023, the NPCI introduced interchange fees of up to 1.1% on merchant UPI transactions done via prepaid payment instruments (PPIs) like wallets and gift cards—not for customers.

Breakdown:

  • For customers: No extra fee, no GST.

  • For businesses using PPIs: Possible interchange fee + GST on that service fee.

GST on UPI for Businesses

Businesses accepting UPI payments may have to consider GST implications in certain cases:

  • GST on Payment Gateway Services:
    If you're using a payment gateway or app that offers value-added services (like analytics, automatic settlement, etc.), GST is charged on those services.

  • Input Tax Credit (ITC):
    Businesses can claim ITC on GST paid for such services, provided proper invoices are maintained.

Recent Updates (As of 2025)

  1. NPCI Mandate on Wallet-Based UPI Transactions:
    The 1.1% interchange fee still applies for high-value merchant payments via wallets. The fee may attract 18% GST, but this is borne by businesses, not customers.

  2. No GST on UPI Cashback or Rewards:
    Cashback earned through UPI apps is not considered a taxable supply under GST law (for users).

Common Myths About GST on UPI

Myth Truth
GST is charged on every UPI payment False — Only certain backend services may attract GST
Users pay GST when sending money via UPI False — No GST for direct money transfers
Businesses can’t claim GST input on digital payments False — They can claim ITC if eligible

Conclusion

To wrap it up, there is no GST on regular UPI transactions for individual users. Businesses, however, may be subject to indirect GST via service charges or interchange fees related to UPI payments.

If you're a consumer, keep using UPI freely without worrying about GST. If you're a business, consult with your tax advisor to optimize your digital payment setup and maximize your Input Tax Credit.

FAQs

1. Is GST applicable on UPI payments by individuals?
No, individuals are not charged GST for sending or receiving money via UPI.

2. Do businesses pay GST on UPI transactions?
Not directly—but they may pay GST on service fees, payment gateway charges, or interchange fees.

3. Is GST charged on UPI wallet transactions?
Wallet-based merchant UPI payments may involve interchange fees with GST, but this is not charged to customers.

4. Can businesses claim GST input on UPI-related charges?
Yes, if proper invoices are provided, businesses can claim ITC.



0 comments:

Post a Comment