The government has confirmed through NPCI that the Goods and Services Tax (GST) on the Unified Payments Interface (UPI) Merchant Discount Rate will not affect small merchants, as over 96% of UPI merchant transactions are below INR 2000 and thus have zero MDR and GST impact.
In a statement, National Payments Corporation of India (NPCI) has clarified that reports suggesting GST on UPI Merchant Discount Rate (MDR) would burden small merchants or make digital payments expensive are incorrect. NPCI explained that the MDR applies only to person-to-merchant transactions exceeding INR 2000, which represent less than 4% of the total UPI merchant transaction volume. Therefore, over 96% of these transactions will continue to have zero MDR and consequently no GST impact. Furthermore, NPCI stated that the GST paid on MDR by a merchant can be adjusted against their GST payable on sales, similar to how input taxes are offset against output tax liability.
Lastly, NPCI noted that merchants with monthly UPI receipts of up to INR 100,000 are exempt from paying MDR.
Source:
Akashvani News
