GST on UPI MDR won’t affect small merchants, insists NPCI
Payments body reiterates that 96 per cent of UPI merchant transactions are below Rs 2,000 and will continue to attract zero MDR
The National Payments Corporation of India (NPCI) on Tuesday (September 22) rejected concerns that GST on UPI Merchant Discount Rate (MDR) will increase the cost of digital payments for small merchants, saying the vast majority of transactions will remain unaffected.
“Certain media reports have alleged that GST on UPI Merchant Discount Rate (MDR) will burden small merchants and make digital payments costly. This is incorrect,” NPCI said in a statement on X (Formerly Twitter).
Transactions below Rs 2,000 remain outside MDR
NPCI said MDR applies only to person-to-merchant (P2M) UPI transactions above Rs 2,000. Transactions up to Rs 2,000 will continue to attract zero MDR and, consequently, there will be no GST on MDR for such payments.
Also read: UPI MDR unlikely to push up cash transactions: Finance Ministry
Government data cited by NPCI shows that transactions of up to Rs 2,000 account for more than 96 per cent of UPI merchant transaction volumes.
The payments body said this means the overwhelming majority of UPI merchant transactions will continue without MDR and therefore will not attract GST on MDR.
GST can be adjusted through input tax credit
NPCI also sought to address concerns over the impact of GST on merchants who do pay MDR.
According to the corporation, GST paid on MDR can be adjusted against the GST payable on the merchant's sale of goods through the input tax credit mechanism. Consequently, NPCI said, merchants do not ultimately bear the GST cost on the MDR amount as an additional expense.
NPCI further said merchants receiving up to Rs 1 lakh through UPI in a month are not liable to pay MDR. They therefore do not face the issue of GST on MDR.
The corporation said apprehensions that GST on MDR would impose an additional burden on merchants are misplaced, maintaining that both the overwhelming majority of UPI transactions and small merchants will remain unaffected.
“Apprehensions that GST on MDR will impose an additional burden on merchants are misplaced. The overwhelming majority of UPI transactions and small merchants remain unaffected,” it said.