{"id":18793,"date":"2026-09-17T03:08:48","date_gmt":"2026-09-17T09:38:48","guid":{"rendered":"https:\/\/shoonya.com\/blog\/?p=18793"},"modified":"2026-09-17T03:08:49","modified_gmt":"2026-09-17T09:38:49","slug":"gst-on-upi-mdr","status":"publish","type":"post","link":"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/","title":{"rendered":"UPI MDR GST at 18% to Impact Payments Above \u20b92,000 Starting Oct 15"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_87_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\"><p class=\"ez-toc-title\" style=\"cursor:inherit\"><\/p>\n<\/div><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#What_Changes_Under_the_UPI_MDR_GST_Framework\" >What Changes Under the UPI MDR GST Framework?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#How_MDR_and_GST_Apply_by_Transaction_Type\" >How MDR and GST Apply by Transaction Type<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#Who_Can_Claim_Input_Tax_Credit_on_UPI_MDR_GST\" >Who Can Claim Input Tax Credit on UPI MDR GST?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#Why_High-Value_UPI_Payments_Are_Increasingly_Important\" >Why High-Value UPI Payments Are Increasingly Important<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#How_Revenue_Estimates_Vary_Across_Calculations\" >How Revenue Estimates Vary Across Calculations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#What_Merchants_Need_From_Banks_for_ITC_to_Work\" >What Merchants Need From Banks for ITC to Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/#Final_Outlook\" >Final Outlook<\/a><\/li><\/ul><\/nav><\/div>\n<nav style=\"--separator: &quot;\/&quot;\" class=\"wp-block-breadcrumbs\" aria-label=\"Breadcrumbs\"><ol><li><a href=\"https:\/\/shoonya.com\/blog\/\">Home<\/a><\/li><li><a href=\"https:\/\/shoonya.com\/blog\/latest-news\/\">News<\/a><\/li><li><span aria-current=\"page\">UPI MDR GST at 18% to Impact Payments Above \u20b92,000 Starting Oct 15<\/span><\/li><\/ol><\/nav>\n\n\n<meta charset=\"UTF-8\">\n<meta name=\"viewport\" content=\"width=device-width, initial-scale=1.0\">\n<link rel=\"preconnect\" 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strong{color:var(--steel);}\n  .source{margin:30px 0 0;padding-top:18px;border-top:1px solid var(--line);font-size:14px;color:var(--grey);word-break:break-word;}\n  .source a{color:var(--copper-deep);}\n  .faq{display:flex;flex-direction:column;gap:12px;margin:6px 0 22px;}\n  .faq-item{background:var(--mint-2);border:1px solid var(--line);border-radius:14px;overflow:hidden;transition:border-color .2s ease, box-shadow .2s ease;}\n  .faq-item:hover{border-color:var(--copper);box-shadow:0 2px 10px rgba(239,161,69,0.18);}\n  .faq-item[open]{border-color:var(--copper);box-shadow:0 2px 10px rgba(239,161,69,0.18);}\n  .faq-q{list-style:none;cursor:pointer;display:flex;align-items:center;justify-content:space-between;gap:16px;padding:17px 20px;font-weight:700;color:var(--forest);font-size:16px;}\n  .faq-q::-webkit-details-marker{display:none;}\n  .faq-icon{flex:0 0 auto;width:26px;height:26px;border-radius:50%;background:var(--copper);color:#fff;display:flex;align-items:center;justify-content:center;font-size:16px;font-weight:800;line-height:1;transition:transform .2s ease, background .2s ease;}\n  .faq-item[open] .faq-icon{background:var(--forest);transform:rotate(45deg);}\n  .faq-a{margin:0;padding:0 20px 18px;color:#33413B;font-size:15.5px;line-height:1.6;}\n  .video-wrap{position:relative;padding-bottom:56.25%;height:0;overflow:hidden;border-radius:14px;margin:6px 0 22px;border:1px solid var(--line);}\n  .video-wrap iframe{position:absolute;top:0;left:0;width:100%;height:100%;border:0;}\n  @media (max-width:640px){ body{font-size:16.5px;} .masthead{padding:32px 24px 28px;} .body{padding:28px 24px 34px;} h2{margin-top:36px;} table{font-size:14px;} }\n  .entry-title,.post-title,.single-post h1,h1.entry-title{color:#000!important;}\n<\/style>\n\n<div class=\"body\">\n  <p>Merchants accepting higher-value UPI payments will face a new tax-linked cost structure from October 15. UPI person-to-merchant transactions above \u20b92,000 will attract a merchant discount rate, and GST will apply only on that MDR charge, not on the transaction amount.<\/p>\n\n  <h2><span class=\"ez-toc-section\" id=\"What_Changes_Under_the_UPI_MDR_GST_Framework\"><\/span>What Changes Under the UPI MDR GST Framework?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <p>The new UPI MDR GST framework separates the payment value from the payment service charge. A customer paying \u20b93,000 through UPI will not see GST applied on \u20b93,000; the tax applies only to the merchant discount rate charged for processing and settlement.<\/p>\n  <p>Merchant discount rate, or MDR, is the fee charged to a merchant for accepting digital payments through a payment network. Under the proposed framework, merchants will bear this fee as a payment settlement service charge, and GST will apply to that service component.<\/p>\n  <p>Sivakumar Ramjee, Executive Director of Indirect Tax at Nangia Global, confirmed that GST will not touch the core transaction value.<\/p>\n\n  <h2><span class=\"ez-toc-section\" id=\"How_MDR_and_GST_Apply_by_Transaction_Type\"><\/span>How MDR and GST Apply by Transaction Type<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <div class=\"tbl-scroll\">\n    <table>\n      <thead>\n        <tr>\n          <th>UPI Merchant Transaction Type<\/th>\n          <th>MDR Treatment<\/th>\n          <th>GST Treatment<\/th>\n        <\/tr>\n      <\/thead>\n      <tbody>\n        <tr>\n          <td>P2M UPI payment above \u20b92,000<\/td>\n          <td>0.4% MDR, capped at \u20b9300<\/td>\n          <td>18% GST on MDR<\/td>\n        <\/tr>\n        <tr>\n          <td>Railways, telecom services, insurance and fuel above \u20b92,000<\/td>\n          <td>Flat \u20b95 MDR<\/td>\n          <td>18% GST on MDR<\/td>\n        <\/tr>\n        <tr>\n          <td>P2M UPI payment of \u20b92,000 or below<\/td>\n          <td>No MDR under this framework<\/td>\n          <td>No GST on MDR<\/td>\n        <\/tr>\n      <\/tbody>\n    <\/table>\n  <\/div>\n\n  <h2><span class=\"ez-toc-section\" id=\"Who_Can_Claim_Input_Tax_Credit_on_UPI_MDR_GST\"><\/span>Who Can Claim Input Tax Credit on UPI MDR GST?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <p>Registered merchants with output GST liability can claim input tax credit, or ITC, on the GST paid on MDR charges. Input tax credit allows a business to set off GST paid on eligible input costs against the GST it collects on its own sales.<\/p>\n  <p>EY India Tax Partner Saurabh Agarwal said the credit would be available where the bank provides a statement showing the charges separately or issues a GST invoice. Merchants dealing in exempt goods and services may not get the same relief, as Ramjee noted that such businesses would have to bear the GST burden on MDR charges.<\/p>\n\n  <h2><span class=\"ez-toc-section\" id=\"Why_High-Value_UPI_Payments_Are_Increasingly_Important\"><\/span>Why High-Value UPI Payments Are Increasingly Important<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <p>The share of person-to-merchant UPI transactions above \u20b92,000 has risen steadily, from 15.1% in FY23 to 20.1% in the June quarter of FY27. The monthly value of such merchant payments stood at a reported \u20b96 lakh crore, generating a gross GST estimate of about \u20b9432 crore a month before adjustments for exemptions, caps, and ITC claims.<\/p>\n\n  <h2><span class=\"ez-toc-section\" id=\"How_Revenue_Estimates_Vary_Across_Calculations\"><\/span>How Revenue Estimates Vary Across Calculations<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <div class=\"tbl-scroll\">\n    <table>\n      <thead>\n        <tr>\n          <th>Person or Source<\/th>\n          <th>GST Revenue Estimate<\/th>\n          <th>Basis Mentioned<\/th>\n        <\/tr>\n      <\/thead>\n      <tbody>\n        <tr>\n          <td>Government official<\/td>\n          <td><span class=\"num\">Around \u20b92,000 crore<\/span> annually<\/td>\n          <td>Based on expected MDR collections of \u20b913,000-\u20b915,000 crore for the year<\/td>\n        <\/tr>\n        <tr>\n          <td>Rajat Mohan, Managing Partner, AMRG Global<\/td>\n          <td><span class=\"num\">\u20b93,500-\u20b94,000 crore<\/span> annually<\/td>\n          <td>Estimated annual GST collections from proposed MDR charges<\/td>\n        <\/tr>\n        <tr>\n          <td>Sivakumar Ramjee, Executive Director &#8211; Indirect Tax, Nangia Global<\/td>\n          <td><span class=\"num\">Over \u20b95,000 crore<\/span> annually<\/td>\n          <td>Current transaction volumes and high-value P2M share<\/td>\n        <\/tr>\n        <tr>\n          <td>Ikesh Nagpal, Lead-Indirect Tax, AKM Global<\/td>\n          <td><span class=\"num\">\u20b95,184 crore<\/span> annually gross<\/td>\n          <td>\u20b96 lakh crore monthly merchant payments above \u20b92,000 and 0.4% MDR before adjustments<\/td>\n        <\/tr>\n      <\/tbody>\n    <\/table>\n  <\/div>\n\n  <h2><span class=\"ez-toc-section\" id=\"What_Merchants_Need_From_Banks_for_ITC_to_Work\"><\/span>What Merchants Need From Banks for ITC to Work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <p>For the credit mechanism to function cleanly, the MDR charge must appear as a separately identified taxed service. Agarwal said merchants can use the credit where banks provide a statement indicating such charges separately or issue a proper GST invoice.<\/p>\n  <p>Documentation becomes central to the process. Without a separately identified charge or a valid invoice, claiming ITC could become harder in practice even where it remains available in principle.<\/p>\n\n  <h2><span class=\"ez-toc-section\" id=\"Final_Outlook\"><\/span>Final Outlook<span class=\"ez-toc-section-end\"><\/span><\/h2>\n  <div class=\"outlook\">\n    <p>The framework adds a tax layer to the merchant fee on higher-value UPI payments while keeping the customer&#8217;s transaction amount outside its scope. For registered merchants, input tax credit can reduce the effective burden. Businesses outside the taxable GST chain may absorb the cost directly. How banks present MDR and GST charges in merchant statements from October 15 will be the key operational detail to watch.<\/p>\n  <\/div>\n\n  <p class=\"source\">\n    <strong>Source:<\/strong>\n    https:\/\/economictimes.indiatimes.com<\/a>\n  <\/p>\n\n  <div class=\"disclaimer\">\n    <strong>Disclaimer:<\/strong> This content is for education and awareness purpose only and should not be considered investment advice or a recommendation. Investments in securities markets are subject to market risks. Read all the related documents carefully before investing.\n  <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Merchants accepting higher-value UPI payments will face a new tax-linked cost structure from October 15. UPI person-to-merchant transactions above \u20b92,000 will attract a merchant discount rate, and GST will apply only on that MDR charge, not on the transaction amount. What Changes Under the UPI MDR GST Framework? The new UPI MDR GST framework separates &hellip; <a href=\"https:\/\/shoonya.com\/blog\/gst-on-upi-mdr\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;UPI MDR GST at 18% to Impact Payments Above \u20b92,000 Starting Oct 15&#8221;<\/span><\/a><\/p>\n","protected":false},"author":17,"featured_media":18795,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_members_access_role":[],"_members_access_error":""},"categories":[1082],"tags":[10587,10588,7544],"class_list":["post-18793","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-news","tag-upi-mdr","tag-upi-mdr-gst","tag-upi-payments"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>18% GST on UPI MDR to Affect High-Value Merchant Payments<\/title>\n<meta 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