Govt Plans Measures To Prevent Merchants Passing UPI MDR Charges To Consumers
The government is exploring measures to ensure that the newly introduced Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions remains a cost for merchants and is not passed on to customers. As per a report by Moneycontrol, discussions are underway with payment aggregators and other stakeholders in the UPI ecosystem ahead of the October 15 implementation of the new…
The Indian government is considering measures to prevent merchants from passing Unified Payments Interface (UPI) Merchant Discount Rate (MDR) charges onto their customers, ahead of the October 15 implementation date. Discussions are taking place with payment aggregators and other stakeholders in the UPI ecosystem to develop a monitoring mechanism to assess the impact of the new framework.
The MDR, which will apply to P2M UPI transactions over Rs 2,000, will have a standard charge of 0.4%, with a cap of Rs 300 for larger transactions. Officials expect the impact on users to be limited, as only about 4% of total UPI transaction volumes will be affected. The government is also addressing concerns that the charges could push users towards cash payments, while ensuring that certain categories of transactions, including railway, telecom, insurance, and fuel payments, remain free of MDR.
The government aims to create a sustainable revenue model for the digital payments ecosystem while protecting small merchants and consumers from being burdened with additional costs. The new MDR system will also attract 18% Goods and Services Tax (GST), with eligible businesses able to claim input tax credit on the GST paid.
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