UPI MDR may attract 18% GST; eligible merchants can claim input tax credit
Effective October 15, UPI payments to merchants (P2M) above Rs 2,000 will attract a 0.4% merchant discount rate with an overall cap of Rs 300. Besides, a flat concessional MDR rate of Rs 5 would be applicable on specific merchant categories such as railways, telecom services, insurance, and fuel for transaction above Rs 2,000.
Starting from an MDR of 0.4% on UPI payments over Rs 2,000, merchants can claim Input Tax Credit (ITC) for GST paid, significantly reducing tax burden. The MDR cap is set at Rs 300. While the GST will apply to merchants, those dealing with exempt goods and services under GST will directly bear the tax burden. This framework is projected to generate over Rs 5,000 crore annually in GST revenue for the government, balancing the need for revenue generation with preserving the zero-fee experience that drives India's retail digital adoption.
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- UPI MDR above Rs 2,000 to attract 18% GST, merchants can claim input tax credit economictimes.indiatimes.com
