GST Council may take up 18% tax on merchant discount rates

The government has indicated that GST issues around merchant discount rates could be considered at the GST Council’s October 7 meeting. While registered merchants can claim input-tax credit, unregistered and composition-scheme sellers face higher digital-payment acceptance costs.

— Source publishedThu, 17 Sept, 2026, 19:15 IST·First seen Thu, 17 Sept, 2026, 19:23 IST·Source The Hindu BusinessLine

What happened

Government said GST issues on merchant discount rates may be taken up by the GST Council. Registered merchants can claim input-tax credit on the 18% GST paid on

Key facts

  • 18% GST on MDR
  • 0.4% MDR
  • October 7

What changed

Government said GST issues on merchant discount rates may be taken up by the GST Council. Registered merchants can claim input-tax credit on the 18% GST paid on MDR, while unregistered and composition-scheme merchants face higher digital-payment acceptance costs.

Why this matters

Prepare for a possible reduction in digital-payment acceptance costs for unregistered and composition-scheme sellers, but avoid operational assumptions until the GST Council issues a decision.

What to watch

  • GST Council agenda, fitment-committee recommendation, and post-meeting communiqué on October 7.
  • Whether the decision applies only to MDR, or also to payment-gateway, aggregator, settlement, POS rental, and related service fees.
  • Eligibility definition for relief: turnover threshold, GST registration status, composition-scheme status, payment rail, or merchant category.
  • Merchant discount rate pricing changes announced by banks, card networks, payment aggregators, and POS providers.
  • Growth in card acceptance among micro-merchants relative to UPI-only acceptance after any policy change.

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