UPI payments above ₹2,000 could carry 47.2 bps merchant cost from Oct. 15
A proposed 0.4% MDR on person-to-merchant UPI transactions above ₹2,000, plus 18% GST on the fee, would lift the gross cost to 47.2 bps. That equals ₹23.60 on a ₹5,000 payment, with MDR capped at ₹300 for transactions of ₹75,000 and above. GST-registered merchants may claim input-tax credit.
What happened
Merchants accepting UPI payments above ₹2,000 may face 0.4% MDR plus 18% GST on that fee, lifting gross cost to 47.2 bps. GST-registered businesses may offset
Key facts
- 18% GST on applicable MDR
- 0.4% MDR (40 bps) for person-to-merchant UPI transactions above ₹2,000
- 47.2 bps effective gross merchant cost including GST
- ₹23.60 cost on a ₹5,000 UPI payment
- ₹300 MDR cap for transactions of ₹75,000 and above
Why this matters
Prioritize payments partnerships or acquisitions with merchant-acquiring, routing, and reconciliation capabilities that can help retailers optimize higher-value UPI acceptance costs.
What to watch
- Official notification confirming the Oct. 15 effective date, covered merchant types, transaction definition, MDR cap treatment, and settlement responsibility.
- Clarification on whether the ₹2,000 threshold applies per transaction, per customer, per day, or to the full transaction value once crossed.
- RBI, NPCI, Finance Ministry, and GST guidance on input-tax-credit eligibility and treatment for merchants under composition or exempt schemes.
- Early changes in high-ticket UPI authorization share, transaction counts, average ticket size, and merchant-side payment-method mix.
- Checkout experiments by major e-commerce, food delivery, travel, electronics, hospital, and grocery platforms.
- Bank and card-network response through incremental cashback, EMI offers, or merchant-funded card promotions.
- Merchant association lobbying, legal challenges, or reports of UPI acceptance restrictions above the threshold.
- Model merchant cost exposure by average ticket size, share of P2M UPI payments above ₹2,000, GST registration status, and gross-margin profile.
- Prioritize payment-routing capabilities at checkout so high-value transactions can be nudged toward cards, EMI, bank transfer, or lower-cost UPI-linked alternatives without broadly discouraging UPI.
- Review whether loyalty points, instant discounts, or card-EMI subsidies can offset the new UPI acceptance cost more efficiently than an explicit consumer surcharge.
- Prepare category-specific policy: absorb costs for strategic traffic-driving purchases, but use payment-method incentives for low-margin high-ticket categories.
- Watch for competitive behavior from large marketplaces and retail chains; their decision to absorb versus steer will set consumer expectations and constrain smaller merchants.