GST Council to take view on 18% levy on UPI merchant fees: Report

New Delhi: The GST Council, chaired by the Union Finance Minister, will take a view on GST levy on merchant fees for UPI transactions above Rs 2,000, government sources said on Thursday.

Effective October 15, UPI payments to merchants (P2M) above Rs 2,000 will attract a 0.4 per cent merchant discount rate (MDR) with an overall cap of Rs 300.

Also Read: Proposed 0.4% UPI merchant fee will not be passed to consumers: Report


Sources said services attract GST, decided by the Goods and Services Tax Council, chaired by the Finance Minister and comprising state counterparts.

"We are hopeful that the GST Council will take a view on the 18 per cent GST on merchant fee on UPI transactions in the larger interest of consumers as was done in case of insurance premium," sources said.

The next GST Council meeting is scheduled for October 7.

Sources also indicated that the Council, in its next meeting, will focus on simplifying the GST process and will not take up tax rate changes.

Also Read: Proposed 0.4% UPI MDR could recover Rs 15,000 crore in first year: NPCI chief

Under the MDR framework, which will come into effect from October 15, the MDR would be borne by the merchants as a charge for payment settlement services.

Since the charge is to be borne by merchants for processing and settling digital payment transactions through the payment network, it would fall under the category of service as per GST law and attract an 18 per cent levy.

However, merchants can claim Input Tax Credit (ITC) on this GST paid on MDR, which, according to tax experts, would soften their overall tax burden.