UPI Transaction: There will be no tax on UPI (Unified Payments Interface) transactions of more than Rs 2,000. The Finance Ministry on Friday termed the imposition of GST (Goods and Services Tax) on transactions above Rs 2,000 as fake.
The ministry said that the reports of imposing GST are completely false and baseless. Since January 2020, the MDR (Merchant Discount Rate) on UPI’s P2M (Person to Merchant) transactions is zero. Therefore, GST does not apply to them.
Table of Contents
UPI Transaction: The incentive scheme was extended for one year on March 19
On March 19, the central government extended the incentive scheme for one year to promote the Unified Payment Interface (UPI). The scheme will continue till March 31, 2026 and about Rs 1,500 crore will be spent on it.
This decision was taken in the Union Cabinet. Union Minister Ashwini Vaishnav said that under this scheme, small shopkeepers will get 0.15% incentive for doing Person to Merchant (P2M) transactions up to Rs 2,000 through RuPay Debit Card and BHIM-UPI.
Person to Merchant UPI transaction means UPI transaction done between merchant and customer. This scheme is effective from 1 April 2021. Promoting RuPay Debit Card will have a direct impact on global payment companies Visa and MasterCard.
How shopkeepers will get incentive, understand with an example
If a customer buys goods worth Rs 2000 and pays through UPI, then the shopkeeper will get an incentive of Rs 3. At the same time, banks will also get incentives. The government will immediately give 80% of the claim amount of the banks. The remaining 20% amount will be given to the banks when the technical fault of the bank is less than 0.75%. The system uptime of the bank will be more than 99.5%.
Under the scheme, the government gives a percentage of the value of transactions made through RuPay and BHIM-UPI systems to the acquiring banks. Acquiring bank means all such banks or financial institutions that process credit or debit card payments for merchants.
Target of 20,000 crore transactions
The government is working to promote digital payments. The Union Minister said that the government aims to complete 20,000 crore transactions in the financial year 2025-26. Along with this, UPI has to be promoted to small towns and villages.
Earlier, the merchant discount rate on RuPay debit card and BHIM-UPI transactions was made zero. Now, with this new incentive scheme, shopkeepers will be promoted to take UPI payments.
He said, ‘UPI payment is an easy, secure and fast payment service for shopkeepers. Also, money comes directly to the bank account without any extra charge.’
UPI is operated by NCPI
RBI has the operation of RTGS and NEFT payment systems in India. Systems like IMPS, RuPay, UPI are operated by the National Payment Corporation of India (NPCI). The government had made a zero-charge framework mandatory for UPI transactions from January 1, 2020.
How does UPI work?
For UPI service, you have to create a virtual payment address. After this, it has to be linked to the bank account. After this, there is no need to remember your bank account number, bank name or IFSC code etc. The person making the payment simply processes the payment request according to your mobile number.
If you have his UPI ID (e-mail ID, mobile number or Aadhaar number), then you can easily send money through your smartphone. Not only money, you will not need net banking, credit or debit card for utility bill payment, online shopping, shopping etc. You can do all these tasks through Unified Payment Interface system.
