NPCI says GST on UPI MDR will not burden small merchants

The National Payments Corporation of India (NPCI) has said that claims that GST on UPI Merchant Discount Rate (MDR) will burden small merchants and make digital payments costlier are incorrect.

In a post on X, NPCI said MDR applies only to person-to-merchant (P2M) transactions above Rs 2,000. Transactions up to Rs 2,000 will continue to have zero MDR and, consequently, no GST impact.

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According to government data cited by NPCI, transactions of up to Rs 2,000 account for more than 96% of UPI merchant transaction volume. As a result, the overwhelming majority of UPI payments will not attract MDR or GST on MDR, it said.


NPCI also said that GST paid by a merchant on MDR can be adjusted against the GST payable on the sale of goods, in the same manner as input taxes are set off against output tax liability.

"Consequently, merchants do not bear the cost of GST on the MDR amount paid by them," NPCI said.

The payments body further said merchants with monthly UPI receipts of up to Rs 1 lakh are not liable to pay MDR and therefore do not face the issue of GST on MDR.

"Hence, apprehensions that GST on MDR will impose an additional burden on merchants are misplaced," NPCI said.

"The overwhelming majority of UPI transactions and small merchants remain unaffected," it added.