Recent Developments in GST on UPI Payments Below ₹2,000: A Comprehensive Overview
Discussions about imposing an 18% Goods and Services Tax (GST) on online purchases under ₹2,000 have attracted a lot of attention in recent months. This plan, which mainly targets payment aggregators, has generated discussions among consumers, business stakeholders, and legislators.
Context: The Idea and Its Consequences
At its 54th meeting in September 2024, the GST Council discussed a plan to impose an 18% GST on payment aggregators' earnings from facilitating online transactions under ₹2,000. This decision was taken to address revenue considerations and establish uniformity to the taxation of digital transactions.
However, there were a number of people who opposed the plan. Atishi, the finance minister for Delhi, expressed worries that consumers and small businesses will suffer as a result of the levy. She underlined that applying GST to low-value transactions may raise merchant expenses, which could then be passed on to customers and deter digital payments.
Present Situation: Awaiting Additional Evaluation
The GST Council chose not to make a decision right away because it understood the complexity and possible consequences of the proposed tax. For a more thorough examination, the issue was instead sent to the GST Fitment Committee. This committee's job is to assess the tax's effects and make suggestions for the Council to take into account.
UPI Transaction Clarification
It's important to remember that payment aggregators, not UPI transactions directly, are the target of the proposed 18% GST. Transactions made through the Unified Payments Interface (UPI), particularly those under ₹2,000, are not subject to these taxes. In March 2025, the Indian government extended the incentive scheme for small-value UPI transactions up to ₹2,000, guaranteeing that these transactions would stay free for small merchants as part of its ongoing efforts to promote digital payments.
Industry Reaction and Issues
The industry's reactions to the plan have been mixed. The necessity for transparency in the taxes regime has been emphasized by certain payment aggregators, while others have voiced worries about the possible financial burden. Payment aggregators are worried that if the tax is imposed, they may pass the extra expenses on to retailers, who may then shift the burden to customers.
In conclusion
The debate over applying an 18% GST to online purchases under ₹2,000 highlights the difficulties in striking a balance between generating income and encouraging digital payments. Stakeholders anticipate a conclusion that takes into account the interests of consumers, businesses, and the larger objective of a paperless economy as the GST fitment committee continues its assessment.
