Ex-RBI governor urges GST council to treat UPI as public good & keep it tax-free

CHENNAI: Former Reserve Bank of India (RBI) Governor C Rangarajan has urged the GST Council to keep UPI person-to-merchant transactions above Rs 2,000 outside the GST net, arguing India should first decide whether the digital payment system needs to carry a cost and whether the time is ripe to impose it.

His suggestion comes ahead of the 57th GST council meeting scheduled to be held in New Delhi on October 8, ahead of the 18% GST implementation on UPI Merchant Discount Rate from October 15.

Speaking at an event marking the launch of a book ‘Cashless Nation: How UPI Changed Everything’ authored by Dr Santanu Paul and B Sambamurthy at IIT Madras, Rangarajan said there is a strong case for treating UPI as a public good, while cautioning this does not necessarily mean it has to remain free forever.

“There is no general rule that no price should be charged on public goods. There are public goods on which prices are charged,” he said, citing museums and parks as examples.

The more immediate question, he said, is whether the time has come to impose a charge on UPI transactions. “There is also the argument that 75% of transactions will not bear any charge. But that cuts both ways. If 75% of transactions will not carry a cost, why introduce the charge at all,” he asked.

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