UPI MDR above Rs 2,000 to attract 18% GST, merchants can claim input tax credit
UPI payments to merchants above two thousand rupees will attract a zero point four percent merchant discount rate. Merchants will pay eighteen percent GST on these charges, which is effective October 15th. Registered merchants can claim input tax credit on the GST paid on these fees. This tax structure aims to generate significant GST revenue for the government annually.
Effective October 15, merchant payments (P2M) exceeding Rs 2,000 in UPI transactions will incur a 0.4% merchant discount rate (MDR), capped at Rs 300. Transactions above Rs 2,000 in certain categories, like railways, telecom, insurance and fuel, will have a flat MDR of Rs 5. This new charge, a fee for processing and settlement services, will be borne by merchants.
GST will apply to the MDR, not the UPI transaction value. This change comes as a growing share of UPI payments are over Rs 2,000, rising from 15.1% in FY23 to 20.1% in the June quarter of FY27. Rajat Mohan of AMRG Global predicts the new regime will generate Rs 3,500-Rs 4,000 crore in annual GST, though registered merchants can claim input tax credit, significantly reducing their tax burden.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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- UPI MDR may attract 18% GST; eligible merchants can claim input tax credit economictimes.indiatimes.com
