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UPI Transaction Charges: 0.4% MDR on Merchant Payments Above ₹2,000, ₹5 Fee for Select Sectors
UPI Fees: Differences have emerged between business organizations and the government over the proposed merchant discount rate for UPI payments above ₹2,000. Under the new system, a 0.4% fee will be charged for the general category, while a rate of ₹5 per transaction has been set for certain sectors and school fees. According to tax experts, GST will also be applicable on the fee.
A 0.4 percent merchant discount rate (MDR) on transactions above ₹2,000 via UPI has become very controversial. Several business groups are requesting the government to scrap this plan. But the government has stated clearly that there is no change in decision.
On Wednesday, tax experts said that merchants will also have to pay 18 percent GST on 0.4 percent MDR. But they will be able to avail themselves of the input tax credit. On Tuesday, NPCI fixed a cap on MDR for UPI transactions at ₹300. It will come into effect from October 15th.
Government sources stated that the MDR will not be rolled back. When asked if the government was considering rolling back the MDR, a senior Finance Ministry official said, "The decision has been taken and there is no question of reversing it." The official added, "The Parliamentary Standing Committee on Finance warned in its 32nd report that a zero MDR system puts pressure on the government treasury and limits the ability to invest in infrastructure. Therefore, it is essential to create a sustainable revenue system."
