Overview
- The National Payments Corporation of India announced on September 15 that a 0.4% Merchant Discount Rate will apply to person‑to‑merchant UPI transactions above Rs 2,000, with an overall cap of Rs 300 per transaction.
- Finance Minister Nirmala Sitharaman and NPCI issued public clarifications on September 21–22 saying the fee is an operator charge not a government tax and that consumers will continue to use UPI free of cost.
- Under the framework payments up to Rs 2,000 and person‑to‑person UPI transfers remain zero‑MDR, merchants with monthly UPI receipts up to Rs 1 lakh are exempt, and selected essential or thin‑margin sectors will pay a flat Rs 5 on transactions above Rs 2,000.
- GST at the standard rate applies only to the MDR service fee and, where merchants are GST registered, that GST can normally be claimed as input tax credit against output GST, reducing the net tax burden for many businesses.
- Opposition leaders and trade groups warn the levy could squeeze thin margins and influence merchant pricing or acceptance choices, and the policy is scheduled to come into force on October 15.