GST on UPI MDR Will Not Add Extra Burden to Most Small Merchants, NPCI Clarifies Amid Concerns Over New Tax Rules:

Media Reports suggesting that the proposed GST on UPI Merchant Discount Rate (MDR) would increase the burden on small merchants are misleading, the National Payments Corporation of India (NPCI) clarified in a post on its social media platform X.

MDR applies only to certain UPI merchant transactions above Rs 2,000. Transactions up to Rs 2,000 continue to have zero MDR and, therefore, there is no GST on MDR for these payments. Government data shows that more than 96% of UPI merchant transactions are worth up to Rs 2,000, meaning the vast majority of transactions remain outside MDR.

TThe government has also clarified that GST paid on MDR can be claimed as input tax credit and adjusted against the GST payable on sales. This means that the merchant can use the GST paid on MDR as a credit against its output GST liability, instead of having to pay it as an additional cost.

In addition, merchants receiving up to Rs 1 lakh per month through UPI are not required to pay MDR. They therefore do not face the issue of GST on MDR.

Overall, the government’s position is that the majority of UPI transactions and small merchants will remain unaffected, and concerns about GST on MDR creating an additional burden for them are misplaced.