New GST on UPI Transactions: What the Rules Say
The GST rate on UPI transactions is a topic that often confuses people. With the rise of digital payments, UPI (Unified Payments Interface) has become one of the most popular ways to pay in India. But does it attract GST? Let’s break it down in simple terms so that anyone—even a 6th grader—can understand.
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New GST Rate on UPI Transactions in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST treatments for UPI-related payments and charges (no compensation cess).
UPI Payments & Charges — New GST Treatment
| Type of UPI Transaction / Charge | SAC Code | New GST Rate | Remarks |
|---|---|---|---|
| UPI P2P fund transfer (person-to-person) | — | 0% (Not a supply) | Pure money transfer; no GST when no fee is charged. |
| UPI payment to merchant (P2M) | — | Same as main supply | GST follows the goods/service on the invoice; UPI mode doesn’t change the rate. |
| Convenience / processing fee charged to customer (gateway/app) | 9971 (financial services) | 18% | On the fee component only; no cess. |
| MDR / merchant processing fee charged by bank/PSP/gateway | 9971 (financial services) | 18% (if levied) | Subject to policy; where MDR is not charged, no GST arises on MDR. |
| Wallet top-up via UPI (adding balance) | — | 0% (Not a supply) | No GST on loading value; any fee for top-up is taxable @ 18%. |
| Chargeback / dispute handling fee | 9971 (financial services) | 18% | Applicable where charged by bank/PSP/gateway. |
| UPI AutoPay debit (subscription collection) | — | Same as main supply | Tax is on the underlying subscription/service; UPI debit itself isn’t taxed. |
Compliance tip: Show any payment/processing fee as a separate line item with SAC 9971 and apply 18%; for product/service purchases, charge GST as per the HSN/SAC of the main supply and simply note “Paid via UPI”.
UPI Payments & Charges — Old GST Treatment
(Old GST Rates – Applicable Until 21st September)
| Type of UPI Transaction / Charge | SAC Code | New GST Rate | Remarks |
|---|---|---|---|
| UPI P2P fund transfer (person-to-person) | — | 0% (Not a supply) | Pure money transfer; no GST when no fee is charged. |
| UPI payment to merchant (P2M) | — | Same as main supply | GST follows the goods/service on the invoice; UPI mode doesn’t change the rate. |
| Convenience / processing fee charged to customer (gateway/app) | 9971 (financial services) | 18% | On the fee component only; no cess. |
| MDR / merchant processing fee charged by bank/PSP/gateway | 9971 (financial services) | 18% (if levied) | Subject to policy; where MDR is not charged, no GST arises on MDR. |
| Wallet top-up via UPI (adding balance) | — | 0% (Not a supply) | No GST on loading value; any fee for top-up is taxable @ 18%. |
| Chargeback / dispute handling fee | 9971 (financial services) | 18% | Applicable where charged by bank/PSP/gateway. |
| UPI AutoPay debit (subscription collection) | — | Same as main supply | Tax is on the underlying subscription/service; UPI debit itself isn’t taxed. |
Compliance tip: Show any payment/processing fee as a separate line item with SAC 9971 and apply 18%; for product/service purchases, charge GST as per the HSN/SAC of the main supply and simply note “Paid via UPI”.
What is GST on UPI Transactions?
UPI is simply a digital payment method that transfers money between bank accounts. So, GST on UPI transactions is not charged because of the payment mode itself. Instead, GST applies to the item or service being bought.
- Buying goods or services? GST applies to the product or service.
- Sending money to friends or family? No GST is charged.
Examples:
- Buy a mobile phone? GST might be 18%.
- Pay for food delivery? GST could be 5%.
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Are There Any Extra Charges for UPI Payments?
No GST is charged on UPI payments directly by the government. But if payment aggregators like wallets or apps charge service fees, those fees can attract 18% GST.
For UPI transactions via prepaid wallets above ₹2,000, an interchange fee may apply—this is charged to the merchant and not the customer.
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Is There GST on UPI for Merchants?
Shopkeepers accepting UPI don’t pay GST on the payment method. But GST must be charged on the goods or services sold if the business is registered under GST.
- You sell electronics and accept UPI.
- GST will apply as usual to the product.
- How you get paid doesn’t change the tax rate.
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Income Tax Considerations for UPI Users
- If you run a business, UPI receipts are taxable business income.
- Gifts received over ₹50,000 from non-relatives through UPI may be taxed as income.
Although not part of GST, this info is useful for financial awareness.
Compliance for Businesses Using UPI
- Get GST registration if your sales exceed ₹40L (goods) or ₹20L (services).
- Maintain records of UPI payments as business sales.
- Include UPI transactions in your monthly returns like GSTR-1 and GSTR-3B.
Conclusion
To wrap up, GST is not charged on UPI as a payment mode. It’s the product or service you buy that decides how much GST you’ll pay.
UPI is a convenient digital tool. For businesses, it’s important to maintain invoices, record UPI sales properly, and stay tax-compliant.
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I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
Frequently Asked Questions (FAQs)
- Is there GST on every UPI payment?No. There is no GST on UPI payments themselves. GST is only applied based on what you’re buying.
- Will I be charged GST if I transfer money to a friend?No. Personal transfers like sending money to friends or family are not considered a supply of goods or services—so no GST applies.
- Do businesses pay GST on UPI payments?Businesses pay GST on their sales, not on the UPI transaction. However, the amount received via UPI must be recorded and included in their tax returns.
- What is the GST rate for fintech platforms or aggregators?If a fintech platform charges a processing fee or service charge, 18% GST may apply to that fee.
