Shriganganagar – Inflation has reached an all‑time high, a fact underscored by recent government statistics.
Prime Minister Narendra Modi, in consultation with Finance Minister Nirmala Sitharaman, announced a new tax regime on UPI transactions.
Under the new rule, UPI payments up to ₹2000 will not attract tax. For payments exceeding ₹2000, tax will be levied. Person‑to‑person (P2P) UPI transfers remain exempt.
The tax will be collected from small and medium‑sized retailers. Merchants will be responsible for collecting the tax from consumers, and the tax will be borne by the retailers from their profits.
Prices of goods will now display the GST amount as well as the UPI tax, marking a shift from the previous system where only GST was shown.
Previously, goods were subject to excise duty when moving from one state to another. GST abolished this system, but the new UPI tax introduces a fixed rate for UPI purchases.
Earlier, the government showcased UPI transaction data as a symbol of digital progress. The Digital India campaign was promoted at a time when cash was scarce, leading to changes in repo rates and the RBI injecting ₹1 lakh crore into the market to increase liquidity.
While traders have felt the cash shortage, UPI has been filling the gap. The introduction of the UPI tax is expected to increase pressure on cash, potentially slowing the market.
When service tax (now GST) was first introduced, the rate was set at 5%. Today it stands at 18% or higher. The Congress government in 1994 introduced the tax, and the rate has risen annually to reach 18% by 2014‑15. The initial service tax covered only three services; today, dining at restaurants is also included.
The new UPI tax will gradually extend to all transactions, and the government aims to promote the system before 2029.
Despite the new tax, the government’s budget is projected to remain in deficit. Over the past 12 years, Prime Minister Modi has sold or privatized several state enterprises, including LIC, Air India, Indian Airlines, and airports, to cover the deficit. Each year, a schedule is prepared to identify which companies will be sold or privatized to reduce the fiscal gap.
Even after the tax is collected, the budget will stay in deficit. While thousands to lakhs of crores will reach the government, the impact on inflation remains a critical concern.
