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Merchants would have to pay 18 percent 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 percent in FY23 to 20.1 percent in the June quarter of FY27, reflecting a sustained shift towards higher-value merchant payments on UPI.
