NPCI says GST on UPI MDR will not burden most small merchants
UPI payments up to Rs 2,000 remain MDR-free, while merchants receiving up to Rs 1 lakh a month via UPI do not pay MDR. NPCI said more than 96% of merchant UPI transaction volume falls within the Rs 2,000 threshold, and GST paid on MDR may be offset against output tax.
What happened
NPCI said GST on UPI MDR will not burden most small merchants: payments up to Rs 2,000 remain MDR-free, and merchants with monthly UPI receipts up to Rs 1 lakh
Key facts
- MDR applies to person-to-merchant UPI transactions above Rs 2,000
- UPI transactions up to Rs 2,000 have zero MDR
- More than 96% of UPI merchant transaction volume is up to Rs 2,000
- Merchants with monthly UPI receipts up to Rs 1 lakh do not pay MDR
Why this matters
Payments and merchant-acquiring partners retain a strong low-cost UPI proposition for small merchants, with GST on applicable MDR potentially creditable against output tax.
What to watch
- Formal GST notification, circular, or tax authority guidance defining taxable MDR treatment and effective dates.
- Acquirer or payment-aggregator revisions to UPI commercial pricing, settlement deductions, or GST invoices.
- Evidence that merchants receiving above Rs 1 lakh monthly through UPI begin facing net acceptance-cost increases.
- Any change to the Rs 2,000 MDR-free transaction threshold or merchant exemption criteria.
- Retailer adoption of UPI surcharges, cash discounts, or payment-method steering.
- Maintain UPI QR acceptance and avoid changing low-ticket payment policies absent bank or acquirer repricing.
- Segment payment costs by ticket size and monthly UPI receipts to identify exposure above the Rs 1 lakh merchant threshold.
- Ask acquirers and payment aggregators for written clarification on MDR, GST treatment, invoicing, and input-tax-credit eligibility.
- Prepare merchant communications emphasizing that most low-value UPI transactions remain MDR-free.
- Monitor whether competitors introduce payment surcharges or minimum-basket thresholds for higher-value digital payments.