GST Council may consider 18% GST on UPI merchant fees above ₹2,000
The GST Council is expected to consider an 18% GST on the proposed 0.4% UPI merchant discount rate for payments above ₹2,000. The MDR would be capped at ₹300, while eligible merchants could offset GST through input tax credit.
What happened
The GST Council is expected to consider an 18% GST on the new 0.4% UPI merchant discount rate for payments above Rs 2,000. Merchants may claim input tax credit,
Key facts
- 0.4% MDR on UPI merchant payments above Rs 2,000
- MDR capped at Rs 300
- 18% GST proposed on MDR
- Rs 15,000 crore potential first-year MDR recovery
Why this matters
The proposal strengthens the case for partnerships or investments in payment orchestration, merchant acquiring and GST-compliance capabilities that help retailers manage higher-value UPI acceptance costs.
What to watch
- GST Council agenda, official recommendations and implementation date.
- Final definition of qualifying merchant transactions, threshold treatment, merchant exclusions and ₹300 cap mechanics.
- Whether GST input tax credit is explicitly available and operationally straightforward for all merchant classes.
- RBI, NPCI, Ministry of Finance and bank commentary on MDR economics and UPI subsidy support.
- Payment aggregator revisions to merchant-rate cards, settlement fees or large-ticket transaction rules.
- UPI transaction-value mix above ₹2,000 and any post-announcement shift toward alternative payment methods.
- Model the gross and post-input-tax-credit cost of a 0.4% MDR plus GST across UPI transactions above ₹2,000, segmented by taxable versus GST-exempt business lines.
- Review checkout and POS routing for high-value transactions; ensure systems can identify threshold-qualified UPI payments and reconcile MDR, GST and input-tax-credit documentation.
- Renegotiate acquiring and payment-aggregator contracts for MDR caps, pass-through transparency, settlement terms and any volume-based rebates.
- Evaluate whether promotions that steer large-ticket customers toward UPI remain economic versus cards, EMI, wallets or direct bank-transfer options.
- Prepare merchant communications and pricing governance to avoid ad hoc customer surcharges if the measure is implemented.