UPI Payments Above ₹2,000 to Remain GST-Free: Centre Confirms

As per the current legal position under the GST law, there is no provision that levies GST on UPI-based transactions exceeding ₹2,000 or of any value.

Key Legal and Regulatory Points:

1. Taxable Event under GST:
   Under Section 9(1) of the CGST Act, 2017, GST is levied on the supply of goods or services or both.
   Merely making a payment via UPI (or any digital mode) is not a supply; it is just a mode of settlement of consideration, and hence not taxable.
2. UPI is not a supply of service:
   Unless a fee is charged by the payment service provider (e.g. bank, fintech platform) for facilitating UPI transfers, there is no “service” rendered as defined under Section 2(102) of the CGST Act.
3. Clarification by Minister in Parliament:
   As rightly mentioned, the Minister of State for Finance, Mr. Pankaj Chaudhary, clarified in the Rajya Sabha that there is no recommendation from the GST Council to levy GST on UPI transactions exceeding ₹2,000.
   This aligns with the provisions of Section 11(1) of the CGST Act, where exemptions and tax rates are decided only on the recommendations of the GST Council.
4. Notices in Karnataka:
   If small traders are receiving notices based on UPI data, these notices are likely not about tax on the UPI transaction itself, but rather may relate to suspicion of unreported taxable turnover.
   The use of UPI data may be for assessment or audit under Section 61 (Scrutiny), Section 65 (Audit), or Section 67 (Inspection/Search/Seizure).

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Conclusion:

There is no GST on UPI transactions under the current GST law, irrespective of the amount. Any notices issued using UPI data should be examined in terms of the actual supply of goods or services and not merely the mode of payment.

If any trader has received a notice alleging tax based merely on UPI receipts without reference to actual taxable supplies, they are advised to:

Respond appropriately to the notice.