UPI fee framework sets MDR on specified payments above Rs 2,000

A new Merchant Discount Rate (MDR) framework for some larger UPI merchant payments is due to take effect on October 15, with the National Payments Corporation of India (NPCI) saying eligible transactions above Rs 2,000 will incur a 0.4% fee and that GST will apply to the fee, not the purchase amount. The NPCI says the MDR will be capped at Rs 300 for transactions of Rs 75,000 and above. It says UPI merchant transactions up to Rs 2,000 will continue to have zero MDR. Merchants receiving up to Rs 1 lakh a month through UPI are also exempt from MDR, according to the corporation. NPCI has said GST at 18% on MDR can be claimed as input tax credit by eligible GST-registered merchants, who may offset it against GST payable on sales. Unregistered merchants cannot claim that credit, leaving uncertainty over the eventual cost for some businesses that incur MDR. A government official cited in reporting said unregistered businesses receiving more than Rs 1 lakh monthly through UPI could face GST on MDR, but described the group as very small. The number of affected merchants has not been established. NPCI says the framework will leave most merchant payments outside the fee.