As digital payments are becoming an everyday habit for millions across India, rumours around the future cost of using platforms like UPI (Unified Payments Interface) or the effect of GST on it continue to make users uneasy.
Recently, during the Reserve Bank of India’s post-Monetary Policy Committee (MPC) press conference, RBI Governor Sanjay Malhotra offered a clear update: there is currently no proposal under consideration to impose charges on UPI transactions.
However, there are some vague catches. Read on to learn more about the growing changes in India’s economic landscape, with UPI.
UPI’s Scale and Significance
UPI has grown into the backbone of India’s digital payments ecosystem. It’s not just about convenience anymore, but a reflection of a broader shift toward a cashless economy. According to the RBI, UPI transactions crossed 20 billion in August 2025, marking a 34% year-on-year growth in volume.
Keeping this infrastructure free to use has been a central pillar in encouraging widespread digital adoption, especially in smaller towns and rural areas.
The government and RBI have consistently emphasised UPI’s role as a public digital utility, and Governor Malhotra’s recent remarks further reinforce this commitment.
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Governor’s Clarification on UPI Charges
Responding to concerns during the press conference, Malhotra stated plainly:
“Is there going to be charges on UPI? Well, there is no proposal before us.”
This direct comment helped ease speculation and offered a measure of certainty to both users and the fintech industry. Notably, after the Governor’s statement, Paytm’s (One 97 Communications) share price rose by more than 2%, reflecting market confidence in the continued support for UPI’s zero-cost model.
Suggested Read: UPI Transaction Limit Crossed ₹5 Lakhs
The Economics Behind UPI
While UPI transactions appear free to the end user, the system itself does involve significant operational costs. Malhotra addressed this as well:
“I never said that UPI can stay free forever… What I said was there are costs (associated with UPI transactions), and they need to be paid for by someone.”
While users currently enjoy zero charges on UPI transactions, it’s important to understand that the system isn’t cost-free to operate. Behind the scenes, maintaining a high-volume, real-time payment infrastructure involves ongoing investments in:
- Technology upgrades
- Security enhancements
- Network scalability
- Operational support and dispute resolution
He emphasised that the long-term sustainability of UPI requires ongoing funding, whether it’s for cybersecurity, infrastructure upgrades, or service innovation. He added:
“Who pays is important, but not as important as someone footing the bill. So, it is important for us for the sustainability of the model that, whether collectively or individually, someone pays.”
| So, the catch isn’t that users are being charged now, but rather that the sustainability of UPI’s free model depends on long-term funding. While the government is currently absorbing these costs, future adjustments in the funding mechanism are expected. It might be through policy shifts, market contributions, or cost-sharing models that may eventually be considered. |
For now, there’s no cause for concern, but the conversation is evolving. Users, businesses, and stakeholders alike should stay informed as the ecosystem matures.
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Who Is Paying Now?
Currently, the government is subsidising the costs involved in running and maintaining UPI. This financial support allows the platform to remain free for both users and merchants, supporting broader goals of financial inclusion and digital penetration.
From a policy standpoint, the Payment and Settlement Systems Act and associated RBI guidelines still prohibit service providers from levying charges on UPI transactions, unless explicitly permitted.
Earlier this year, the Ministry of Finance also reassured the public in Parliament that there are no current plans to introduce transaction charges for UPI.
Suggested Read: Top UPI Spends Done in India
Breaking Myths: GST and UPI
As UPI continues to power millions of digital transactions daily, questions around its tax implications, particularly under GST, often come up. To clarify, there is no GST applied to the transaction amount when using UPI, whether for personal transfers or merchant payments.
The reason is simple: UPI functions as a payment mechanism, not as a taxable supply of goods or services. Therefore, transferring money via UPI does not attract GST on its own.
However, in cases where a platform or intermediary charges a separate service fee, such as a convenience or processing charge, the GST may be applied to that fee, typically at 18%. It’s important to note that this doesn’t change the tax-free status of the UPI transaction itself.
Both the government and RBI have also confirmed that there are no current plans to impose GST on UPI payments directly, reassuring users that ordinary UPI usage remains tax-free under the existing policy.
Looking Ahead
While the present stance is clear, the conversation around UPI’s long-term funding model is ongoing. The issue of sustainability will remain part of the broader digital finance discourse, particularly as transaction volumes continue to grow.
What you, as a consumer, must be looking out for are other charges, like platform fees or GST charges on the goods you buy.
For now, users can continue to rely on UPI as a fast, secure, and free payment solution. Any changes to this model would likely involve detailed stakeholder discussions and gradual implementation, ensuring transparency and minimal disruption.
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