A WhatsApp forward says "18% GST on every UPI payment above ₹2,000". With NPCI's planned 0.4% merchant fee in the news this month, the rumour is back. Here is the fact check, and the real cost a shop owner would face if the fee starts.
Key takeaway: There is no GST on the UPI payment amount, of any size. GST applies only to a fee a bank charges, such as MDR. If NPCI's 0.4% fee starts, a merchant receiving ₹5,000 would pay a ₹20 fee plus about ₹3.60 GST on that fee — not GST on ₹5,000.
Proof matrix
| Claim | Verdict | Source |
|---|---|---|
| "18% GST on UPI payments above ₹2,000" | False — no such proposal | Ministry of Finance via PIB, 18 April 2025 |
| "GST is charged on UPI transactions" | False — GST is levied on charges such as MDR, not on the payment | PIB, 18 April 2025 |
| "UPI merchant payments carry MDR today" | False — P2M UPI MDR has been nil since January 2020 | PIB, 18 April 2025 |
| "NPCI's 0.4% fee is live" | False — deferred till after Diwali; no new date yet | NPCI steering committee, 13 Oct 2026 (reported) |
Why GST cannot apply to a UPI payment
GST is a tax on a supply of goods or services. When your customer pays ₹5,000 by UPI, that ₹5,000 is the price of your goods — any GST on it is already in your invoice. The UPI transfer itself is just money moving. What a bank or app can supply is a service (processing the payment), and only the fee for that service can attract GST. Since UPI merchant payments carry no MDR today, there is no fee and so no GST.
If the 0.4% fee starts: what a merchant actually pays
Financial service fees such as MDR attract GST, generally at 18%. Using the reported 0.4% rate on merchant payments above ₹2,000 and the reported ₹300 cap:
| UPI payment received | Fee at 0.4% | GST on fee (18%) | Total cost to merchant |
|---|---|---|---|
| ₹1,500 | ₹0 | ₹0 | ₹0 |
| ₹5,000 | ₹20 | ₹3.60 | ₹23.60 |
| ₹25,000 | ₹100 | ₹18 | ₹118 |
| ₹75,000 or more | ₹300 (reported cap) | ₹54 | ₹354 |
A GST-registered merchant who receives a proper tax invoice from the bank can usually claim input tax credit on that GST, so the real cost is closer to the fee alone.
What has not changed
- Customers pay nothing extra for UPI.
- Person-to-person transfers to family and friends stay free.
- Payments up to ₹2,000 are outside the proposed fee.
- Your sales are taxable the same way whether paid by cash, card or UPI.
How to spot the next fake UPI tax message
- No circular number or date? Treat it as a rumour.
- Check PIB Fact Check and npci.org.in before forwarding.
- Real changes are announced by NPCI, RBI or the Ministry of Finance, not by forwards.
Playbook for shop owners
- Keep accepting UPI — nothing has changed at your counter.
- Count how many UPI receipts above ₹2,000 you get in a month to estimate the fee if it starts.
- Ask your bank whether your QR is on the small-merchant (P2PM) route.
- If the fee starts, record bank charges as an expense and keep the bank's GST invoice for ITC.
Track UPI receipts and bank fees in DAM
Steps use DAM's in-app search (Receive Money, Record Expense, Day Book).
- Open Search and type Receive Money. Use Add Payment Mode to mark UPI receipts against your Bank Account.
- Search Record Expense to enter any bank charge or MDR deducted, so profit is not overstated.
- Search Day Book to review the day's receipts and charges together.
Want the full story on the merchant fee? Read UPI charges above ₹2,000: NPCI 0.4% fee deferred.
See your UPI receipts and bank charges together
Record every receipt by mode and every bank fee as an expense.
Frequently Asked Questions
Is there GST on UPI payments above ₹2,000?
No. The Ministry of Finance has called this claim false. There is no GST on the UPI payment amount.
When does GST apply in UPI?
Only on a fee charged for the payment service, such as MDR. UPI merchant payments carry no MDR today.
Will customers pay the 0.4% fee?
As reported, the fee is charged to the merchant, not the customer. It is not in effect yet.
Can a merchant claim ITC on GST paid on MDR?
Generally yes, if the merchant is GST-registered, uses the service for business and holds the bank's tax invoice.
Sources
Content checked on 23 October 2026. PIB: No proposal to levy GST on UPI transactions over ₹2,000 (18 Apr 2025) · NPCI · Aryan Age: NPCI defers UPI merchant charges, ₹300 cap.
Disclaimer: This guide is for educational purposes only and does not constitute formal tax, legal or financial advice. Final charges depend on NPCI's official circular and your bank. Verify with a registered Chartered Accountant (CA) before acting.