Overview
- NPCI announced a revised Merchant Discount Rate that will apply to person-to-merchant UPI payments above Rs 2,000 at 0.4% capped at Rs 300, with sector exceptions such as a flat Rs 5 for fuel and other thin-margin services.
- The Finance Ministry and FM Nirmala Sitharaman have repeatedly said the MDR is not a tax and should not be passed to consumers, and that person-to-person UPI transfers and payments up to Rs 2,000 will remain zero-MDR.
- NPCI clarified that merchants with monthly UPI receipts up to Rs 1 lakh are exempt and that GST on MDR can be offset through input tax credit for registered businesses, which officials say prevents an extra out-of-pocket GST burden.
- Trade groups have organised a ‘No UPI Day’ for October 2 and some merchants in Madhya Pradesh have already refused UPI payments above Rs 2,000 as a protest tactic ahead of the October 15 start date.
- Industry bodies warn the fee could push thin-margin merchants toward cash, lead to bill-splitting workarounds, and weaken digital formalisation, making shifts in payment behaviour the key thing to watch after implementation.