UPI MDR: Govt To Track UPI Volumes From Oct 15; GST Burden On Small Merchants May Go To Council

The Finance Ministry will closely track UPI transaction volumes from Day 1 of the new Merchant Discount Rate (MDR) regime on October 15, with the government planning to regularly assess whether the new fee has any impact on the adoption and usage of UPI, officials said.

The government will monitor transaction trends after the rollout and review the data regularly, particularly given the scale of UPI usage across merchants and consumers.

A key concern is the additional 18% GST burden on the MDR for small merchants. The issue could be taken up by the GST Council for review, the official said.

Notably, 0.4% MDR will apply on eligible merchant UPI transactions above Rs 2,000. An additional 18% GST will be charged on the MDR, taking the effective cost for merchants higher than the headline MDR rate.

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The GST impact could be more significant for small merchants who are not registered under GST, as they may not be able to claim input tax credit (ITC). While GST-registered merchants eligible for ITC would be able to offset the tax liability, subject to applicable rules.

Despite the introduction of the levy, the government is confident that UPI transaction volumes will remain intact, the Finance Ministry official said, adding that the government will closely watch the data once the new regime takes effect.

The volume trends from October 15 onwards will therefore be an important indicator of how merchants and the wider UPI ecosystem respond to the new MDR framework.

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