Archive · 24 Sep 2026
GST Council to Consider MDR Proposal for UPI Payments
A new charge called MDR may apply to some UPI payments.
It is planned for payments above Rs 2,000 made by people to merchants.
The charge is expected to be 0.4% and begin on October 15.
GST of 18% is currently charged on MDR.
Merchants may adjust that GST through Input Tax Credit.
Officials say the MDR money will be shared among banks and payment providers, not given to the government.
They also say customers should not have to pay the charge directly.
The Indian Banks’ Association is explaining the change to merchants and customers.
The GST Council is expected to consider a proposal concerning GST on UPI merchant discount rate charges.
An 18% GST currently applies to MDR charges, which merchants can adjust through Input Tax Credit.
A 0.4% MDR is scheduled for UPI person-to-merchant payments above Rs 2,000 from October 15.
Sources said MDR collections will remain within the payment ecosystem and will not go to the government.
The Indian Banks’ Association is conducting an awareness campaign about the change for customers and merchants.
- Who
- The GST Council, payment providers, banks, merchants, customers, and the Indian Banks’ Association are involved.
- What
- The GST Council is expected to consider a proposal concerning GST on UPI MDR charges, while a 0.4% MDR is planned for certain UPI transactions.
- When
- The MDR is scheduled to take effect on October 15; the GST proposal will be presented at an unspecified opportune time.
- Where
- The articles do not specify a location.
- Why
- Sources said charges are needed to support the UPI payment ecosystem and that the GST treatment of MDR should be considered.
MDR Supports Payment Infrastructure
Concerns About Consumer Impact
Who bears the charge
MDR Supports Payment Infrastructure
Sources said customers will not be impacted directly and compared MDR with charges on credit and debit card payments.
Concerns About Consumer Impact
The government and the Indian Banks’ Association are working on a mechanism to ensure UPI MDR is not passed on to consumers.
Effect on digital payments
MDR Supports Payment Infrastructure
Sources said UPI should continue growing because of its convenience and that MDR is needed for efficient payments.
Concerns About Consumer Impact
The article notes concerns that cash could return, although sources said those fears may be unfounded.
GST treatment
MDR Supports Payment Infrastructure
The proposal seeks a favourable view from the GST Council on the GST applied to MDR charges.
Concerns About Consumer Impact
MDR charges currently attract 18% GST, although eligible merchants can adjust it through Input Tax Credit.
- Current GST on MDR
- 18%
- Planned MDR
- 0.4% for eligible UPI person-to-merchant transactions
- Transaction threshold
- Payments above Rs 2,000
- Effective date
- October 15
- GST adjustment
- Merchants can adjust GST on MDR through Input Tax Credit
- Government revenue
- Sources said no MDR collections will go to the Consolidated Fund of India
- MDR distribution
- 40% to the issuing bank, 30% to the merchant acquirer, 20% to the UPI app, and 10% to the payer PSP bank