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MDR Charges
The Supreme Court will on Monday hear a plea challenging the Centre's decision to impose a Merchant Discount Rate (MDR) on specified UPI person-to-merchant transactions of over Rs 2,000. Ending nearly six years of fully free UPI payments, the government has introduced a 0.4 per cent fee on transfers worth over Rs 2,000 made to merchants through the UPI platform from October 15 while explicitly ring-fencing everyday person-to-person transactions and small payments from any charge. The MDR will be capped at Rs 300 for payments of Rs 75,000 and above. Essential and thin-margin sectors -- railways, telecom, insurance, fuel and agricultural inputs -- will pay a flat MDR of Rs 5 per transaction above Rs 2,000. Payments into mutual funds, securities and through stockbrokers and dealers will attract 0.02 per cent MDR, also capped at Rs 300. Person-to-person (P2P) transfers -- which make up 37 per cent of UPI's transaction volume and 70 per cent of its transaction value -- will continue to
The finance ministry on Wednesday clarified that there was no foreign influence behind the decision to impose 0.4 per cent Merchant Discount Rate on UPI transactions above Rs 2,000. The clarification follows accusations by some Opposition parties, including the Congress, that the government succumbed to US pressure in taking the decision to impose the Merchant Discount Rate (MDR). "Some claims suggest the change is due to foreign influence. This is false. India's UPI policy decisions are made independently, with the clear goal of building a self-sustaining, inclusive, and affordable digital payments ecosystem," the finance ministry said in a post on X. Since its launch in 2016, UPI has grown into the world's largest real-time interoperable payment system - entirely on India's own terms, it said. UPI processed 24.5 billion transactions in August 2026 alone. To keep this system self-sustainable, secure and innovative, a small fee on high-value merchant transactions helps fund better
Merchants would have to pay 18 per cent GST on the Merchant Discount Rate (MDR) charges for UPI payments above Rs 2,000, but can claim input tax credit (ITC), thereby easing the overall tax burden, tax experts said on Wednesday. Effective October 15, UPI payments to merchants (P2M) above Rs 2,000 will attract a 0.4 per cent merchant discount rate with an overall cap of Rs 300. Besides, a flat concessional MDR rate of Rs 5 would be applicable on specific merchant categories such as railways, telecom services, insurance, and fuel for transaction above Rs 2,000. The share of P2M UPI transactions above Rs 2,000 has steadily increased from 15.1 per cent in FY23 to 20.1 per cent in the June quarter of FY27, reflecting a sustained shift towards higher-value merchant payments on UPI. Under the proposed framework, the MDR would be borne by the merchants as a charge for payment settlement services. Since the charge is to be borne by merchants for processing and settling digital payment ...