UPI MDR could cost 47.2 bps with GST for merchants
The new framework introduces a 0.4% MDR on person-to-merchant UPI transactions above Rs 2,000, capped at ?300 on transactions of Rs 75,000 and above, while consumers will not be charged. It takes effect from October 15. GST is paid by the service provider who typically recover the amount from whoever receives service.
The introduction of a 0.4% MDR on UPI payments above ₹2,000, effective from October 15, will result in an additional 47.2 basis points cost for businesses, according to business insiders. This amount is slightly higher than the initial headline 40-bps MDR. Merchants registered under GST can claim tax offsets, reducing the effective cost of transactions.
The tax component would be 7.2 basis points, as the GST rate of 18% is applied to the MDR. However, merchants with Input Tax Credit (ITC) may be able to offset the tax, resulting in a potentially lower effective cost.
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