Tax-law amendments open path to proposed UPI MDR for larger merchants
Lok Sabha’s tax-law amendments could enable a 0.05%-0.07% UPI merchant discount rate on payments above ₹2,000 for merchants with ₹1 crore-₹1.5 crore in annual turnover, subject to final policy notification.
What happened
Lok Sabha passed tax-law amendments easing data-centre incentives and enabling leased facilities. The Bill also clears the way for potential 0.05%-0.07% UPI MDR
Key facts
- 0.05%-0.07% proposed MDR on UPI transactions above ₹2,000
- ₹1 Cr-₹1.5 Cr annual merchant turnover threshold
- FY27-FY47 tax exemption window
- $57 Bn committed data-centre investment
- $17 Bn Indian public-cloud market in 2025
- $44 Bn projected public-cloud market by 2030
Why this matters
Payments, POS, and merchant-acquiring players should assess partnership and consolidation opportunities if a new UPI MDR expands monetization among larger retail merchants.
What to watch
- Final government notification specifying merchant turnover threshold, transaction threshold, MDR rate, tax treatment, and effective date.
- Clarification on whether the levy applies to all UPI rails, only P2M transactions, or specific app/payment-provider flows.
- Rules on customer surcharge pass-through, merchant disclosure, and treatment of refunds and chargebacks.
- RBI, NPCI, and payment-acquirer implementation guidance.
- Large retailer and e-commerce platform responses, especially changes to UPI offers on orders above ₹2,000.
- Evidence of UPI mix migration toward cards, EMI, wallets, or bank transfer for higher-value baskets.
- Model UPI transaction exposure above ₹2,000 by store format, category, and merchant entity turnover.
- Reopen payment-acquirer contracts to seek MDR caps, volume rebates, blended pricing, and routing flexibility.
- Assess whether high-ticket categories can shift customers toward lower-cost rails without harming conversion.
- Avoid immediate consumer surcharges; prepare targeted pricing and promotion adjustments if cost pass-through becomes widespread.
- Review legal entity and franchise structures only for compliance-safe implications of turnover thresholds.
- Engage industry associations on threshold design, exemptions, implementation timelines, and no-surcharge rules.