The National Payments Corporation of India has reassured small merchants that new GST on merchant discount rates for high-value UPI transactions will not affect payments below Rs 2,000, aiming to minimise impact on small shops amidst upcoming regulatory changes.
The National Payments Corporation of India has pushed back against claims that a proposed goods and services tax on Unified Payments Interface merchant discount rates will raise costs for small shops or make digital payments more expensive. In a post on X, the payments body said the charge applies only to person-to-merchant transactions above Rs 2,000, while payments at or below that level will remain free of MDR and therefore outside the scope of any GST effect.
NPCI’s clarification comes as the new MDR framework for higher-value UPI merchant payments is due to take effect on October 15, 2026. Reports from LiveMint, Moneycontrol and Business Standard said the levy will be 0.4% for person-to-merchant payments above Rs 2,000, with a cap of Rs 300 on transactions above Rs 75,000, while everyday small-ticket payments will continue to be exempt.
The payments body also said the tax treatment should not leave merchants out of pocket because GST paid on MDR can be set against GST due on sales, in line with input tax credit rules. NPCI said merchants with monthly UPI receipts of up to Rs 1 lakh are not liable to pay MDR, and government data cited by the body shows transactions of Rs 2,000 or less account for more than 96% of UPI merchant volume, meaning the overwhelming majority of payments should remain unaffected.
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