UPI MDR returns for merchant payments above Rs 2,000 from Oct 15

Eligible merchant UPI payments above Rs 2,000 will attract MDR from October 15, with 18% GST levied on the fee rather than on the payment value. Small qualifying merchants remain exempt, while GST-registered businesses may be able to claim input-tax credit.

— Source publishedFri, 18 Sept, 2026, 19:43 IST·First seen Fri, 18 Sept, 2026, 19:57 IST·Source Financial Express · BrandWagon

What happened

From October 15, 2026, eligible merchant UPI payments above Rs 2,000 will face MDR, with 18% GST charged only on the MDR. Customers remain exempt; qualifying

Key facts

  • October 15, 2026
  • UPI payments above Rs 2,000
  • 0.4% MDR
  • Rs 300 MDR cap
  • Rs 5 flat MDR for some sectors
  • 0.02% MDR for capital-market transactions
  • 18% GST on MDR
  • Rs 10,000 example payment
  • Rs 40 MDR on Rs 10,000
  • Rs 7.20 GST in example
  • Rs 47.20 total processing cost in example
  • Rs 5.90 cost on Rs 5 MDR including GST
  • Rs 1 lakh monthly UPI QR receipts threshold
  • Rs 40 lakh GST registration threshold
  • 96% of P2M UPI transactions
  • 99% of small-merchant UPI payments
  • October 7 GST Council meeting

Why this matters

Payments platforms should evaluate merchant-segmentation, MDR-pass-through, tax-credit tooling, and partnerships that help larger businesses manage the new compliance and cost burden.

What to watch

  • Final notification defining eligible merchants, MDR rate, transaction thresholds, exemptions and enforcement mechanics.
  • Whether MDR is prohibited from being passed to customers or whether merchant discounting by payment method is permitted.
  • UPI transaction-value mix above Rs 2,000 by retailer segment after October 15.
  • Acquirer and payment-gateway pricing updates, including enterprise rebates and settlement-fee changes.
  • RBI, NPCI and GST clarification on input-tax-credit eligibility and invoice/documentation requirements.
  • Competitive responses from large marketplaces, electronics chains, QSRs and omnichannel retailers.
  • Model MDR plus 18% GST by payment instrument, merchant category and average UPI ticket size; isolate exposure above Rs 2,000.
  • Review payment-acquirer contracts for MDR caps, volume rebates, GST treatment and pass-through clauses before October 15.
  • Test checkout messaging and incentives that preserve conversion while selectively routing high-value payments to lower-cost rails.
  • Train store and customer-service teams on compliant handling of any payment-method pricing differences.
  • Reforecast gross-margin pressure for high-ticket categories and update promotional funding assumptions with suppliers and marketplace sellers.