UPI MDR Charges To Attract 18% GST; Merchants Can Claim Input Tax Credit On Eligible Transactions
The Merchant Discount Rate (MDR) introduced on select UPI merchant transactions will be subject to 18% GST, a Central Board of Indirect Taxes and Customs (CBIC) official was cited as saying as per a report by NDTV Profit. The tax will be calculated only on the MDR amount and not on the overall value of the UPI payment. Under the new framework, person-to-merchant UPI payments above Rs 2,000 will…
The Central Board of Indirect Taxes and Customs (CBIC) announced that the Merchant Discount Rate (MDR) imposed on specific UPI merchant transactions will now be subject to an 18% Goods and Services Tax (GST), according to a report by NDTV Profit. This tax will only be levied on the MDR amount, excluding the total UPI payment value.
From October 15, person-to-merchant UPI payments exceeding Rs 2,000 will incur an MDR of 0.4%, subject to the stipulated transaction limit. GST-registered merchants can claim input tax credit (ITC) on the GST paid for MDR. For instance, on a Rs 10,000 UPI transaction, the MDR would be Rs 40, with an additional Rs 7.20 in GST, totaling Rs 47.20.
However, small merchants receiving up to Rs 1 lakh per month through UPI QR codes will be exempt from this new tax. Certain categories, including payments for railways, telecom, fuel, and insurance services, will attract a flat Rs 5 charge for transactions above Rs 2,000. Capital market transactions, such as mutual fund and stockbroking payments, will have a lower MDR of 0.02%, also capped at Rs 300.
The new UPI charges framework will commence from October 15, while person-to-person UPI transfers will remain free. Government officials stated that the exemption applies to around 96% of merchant transactions, with 5% of MDR collections allocated to a fund for enhancing UPI adoption among small merchants.
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