NPCI says GST on UPI MDR will not burden small merchants

The National Payments Corporation of India (NPCI) has said that GST on the Merchant Discount Rate (MDR) for UPI transactions will not burden small merchants. Transactions up to Rs 2,000 will continue to have zero MDR and no GST, and these account for more than 96% of UPI merchant transaction volume, NPCI stated. Merchants with monthly UPI receipts of up to Rs 1 lakh are exempt from paying MDR.

NPCI also noted that any GST a merchant pays on MDR can be adjusted against the GST payable on goods sold, so merchants do not bear the cost. Separately, Finance Minister Nirmala Sitharaman clarified that the MDR is a charge between payment operators and will not be passed on to consumers. She said it is neither a tax nor a cess and will not go into the Consolidated Fund of India.

The framework, effective October 15, 2026, will apply a 0.4% MDR (capped at Rs 300) to merchant UPI transactions above Rs 2,000. The Times of India reported that Sitharaman blamed the opposition for creating confusion over the charges.