There will be no tax on UPI (Unified Payments Interface) transactions above Rs 2,000. The Finance Ministry on Friday called the imposition of GST (Goods and Services Tax) on transactions above Rs 2,000 fake.
The ministry said that the reports of GST imposition are completely false and baseless. MDR (Merchant Discount Rate) on UPI’s P2M (Person to Merchant) transactions has been zero since January 2020. Therefore, GST does not apply to them.
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 Unified Payment Interface (UPI). This scheme will continue till 31 March 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 in 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 will shopkeepers get incentives, understand with an example
If a customer buys goods worth Rs 2000 and pays through UPI, 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 to 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 done through RuPay and BHIM-UPI system 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’s target is to complete 20,000 crore transactions in the financial year 2025-26. Along with this, UPI is to be promoted to small towns and villages.
Earlier, the merchant discount rate on RuPay debit card and BHIM-UPI transactions was zeroed. Now, this new incentive scheme will promote shopkeepers 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 payer simply processes the payment request based on 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, but you will also not need net banking, credit or debit card for utility bill payment, online shopping, shopping etc. You can do all these tasks through the Unified Payment Interface system.
Special things related to UPI
- UPI system transfers funds in real time.
- To send money to someone, you will only need their UPI ID (a virtual identity such as email address, mobile number, Aadhaar number).
- With a UPI ID, you will not need to get information about the beneficiary’s name, account number, bank etc. to transfer funds. The amount is transferred using IFSC code and mobile number.
- UPI has been developed on the model of IMPS. Therefore, you can do 24*7 banking with this app.
- You will not need OTP, CVV code, card number, expiry date etc. to do online shopping with UPI.
- Transactions can be done from multiple bank accounts with one mobile application.
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