NPCI says UPI MDR and GST changes will spare small merchants and most transactions
From October 15, UPI merchant payments above Rs 2,000 will carry 0.4% MDR, capped at Rs 300, with 18% GST levied on the MDR fee rather than the transaction value. NPCI says transactions up to Rs 2,000 and merchants receiving up to Rs 1 lakh monthly via UPI remain exempt.
What happened
National Payments Corporation of India (NPCI) · NPCI said GST on UPI MDR will affect only merchant payments above Rs 2,000, while over 96% of transaction volume
Key facts
- UPI merchant payments above Rs 2,000 will attract 0.4% MDR from October 15, capped at Rs 300
- 18% GST applies to MDR service fee, not transaction value
- Transactions up to Rs 2,000 retain zero MDR
- More than 96% of UPI merchant transaction volume is up to Rs 2,000
- Merchants receiving up to Rs 1 lakh monthly via UPI are exempt from MDR
What changed
NPCI said GST on UPI MDR will affect only merchant payments above Rs 2,000, while over 96% of transaction volume and small merchants remain exempt. GST applies to MDR fees, with eligible GST-registered retailers able to claim input tax credit.
Why this matters
Small retailers remain protected from UPI acceptance costs, but merchants with ticket sizes above Rs 2,000 should plan for a 0.4% MDR plus GST impact from October 15.
What to watch
- Formal NPCI circulars defining whether the Rs 1 lakh exemption is measured by merchant, outlet, account, month or payment aggregator relationship.
- Clarification on MDR application to refunds, partial payments, split tenders, recurring payments and QR-based payment flows.
- Major payment aggregators' revised merchant rate cards and whether they add margin above the stated 0.4% MDR.
- Announcements of UPI convenience fees, reduced UPI discounts or payment steering by electronics, travel, healthcare, jewelry and other high-ticket merchants.
- Evidence of transaction splitting around the Rs 2,000 threshold or shifts from UPI to cards and bank transfers.