{"id":1313956,"date":"2026-09-18T15:05:55","date_gmt":"2026-09-18T09:35:55","guid":{"rendered":"https:\/\/trak.in\/stories\/?p=1313956"},"modified":"2026-09-18T15:06:17","modified_gmt":"2026-09-18T09:36:17","slug":"govt-imposes-18-gst-on-mdr-for-upi-payments-from-oct-16","status":"publish","type":"post","link":"https:\/\/trak.in\/stories\/govt-imposes-18-gst-on-mdr-for-upi-payments-from-oct-16\/","title":{"rendered":"Govt Imposes 18% GST On MDR For UPI Payments, From Oct 16"},"content":{"rendered":"\n<p>An <strong>18% Goods and Services Tax (GST)<\/strong> will apply to the Merchant Discount Rate (MDR) charged on eligible UPI transactions from October 15, 2026, government officials have clarified.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-18-at-3.00.56-PM-1024x576.png\" alt=\"\" class=\"wp-image-1313968\" srcset=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-18-at-3.00.56-PM-1024x576.png 1024w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-18-at-3.00.56-PM-300x169.png 300w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-18-at-3.00.56-PM-768x432.png 768w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-18-at-3.00.56-PM-1536x865.png 1536w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-18-at-3.00.56-PM-2048x1153.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>The GST will <strong>not be calculated on the full value of a UPI payment<\/strong>. Instead, it will apply only to the MDR or processing fee charged to the merchant.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">GST Will Apply Only to the MDR<\/h2>\n\n\n\n<p>Under the new UPI framework, eligible person-to-merchant transactions above <strong>\u20b92,000<\/strong> will attract an MDR of <strong>0.4%<\/strong>, subject to a maximum charge of \u20b9300 per transaction. The MDR is borne by the merchant and is deducted during settlement.<\/p>\n\n\n\n<p>For example, if a customer makes a <strong>\u20b910,000 UPI payment<\/strong>, the merchant would incur an MDR of \u20b940.<\/p>\n\n\n\n<p>The 18% GST would then be calculated on the \u20b940 MDR, resulting in an additional <strong>\u20b97.20 in GST<\/strong>. The merchant&#8217;s total payment-related cost would therefore be \u20b947.20.<\/p>\n\n\n\n<p>The customer would still pay only the original \u20b910,000.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Happens to the \u20b95 MDR?<\/h2>\n\n\n\n<p>Certain categories, including <strong>railways, telecommunications, insurance, fuel and agricultural inputs<\/strong>, will have a flat \u20b95 MDR for eligible transactions above \u20b92,000.<\/p>\n\n\n\n<p>The 18% GST will apply to the \u20b95 fee, resulting in <strong>90 paise of GST<\/strong>.<\/p>\n\n\n\n<p>Therefore, the total charge within the merchant payment ecosystem would be \u20b95.90.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Merchants Can Claim Input Tax Credit<\/h2>\n\n\n\n<p>GST-registered businesses will generally be able to claim the GST paid on MDR as <strong>input tax credit (ITC)<\/strong>, subject to the normal conditions applicable under GST rules.<\/p>\n\n\n\n<p>This means the 18% GST does not necessarily become a permanent cost for a business that is eligible to claim ITC.<\/p>\n\n\n\n<p>However, businesses supplying GST-exempt goods or services could face limitations on the amount of credit they can claim, potentially making part of the GST an actual cost.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Customers Will Not Pay the GST<\/h2>\n\n\n\n<p>The government&#8217;s clarification is important because the introduction of MDR has already created confusion about whether UPI users will face additional charges.<\/p>\n\n\n\n<p>The new GST applies to the <strong>MDR paid by merchants<\/strong>, not to the customer&#8217;s UPI payment value. The government has also been examining measures to prevent merchants from passing the MDR cost directly to consumers.<\/p>\n\n\n\n<p>Around <strong>4% of total UPI transaction volume<\/strong> is expected to be covered by the new MDR framework, while person-to-person transfers and UPI payments up to \u20b92,000 remain outside the MDR structure.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Similar to GST on Card MDR<\/h2>\n\n\n\n<p>Government officials have compared the treatment with existing credit and debit card transactions, where the processing fee attracts 18% GST.<\/p>\n\n\n\n<p>The new arrangement essentially extends the same tax treatment to the MDR charged on eligible UPI transactions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Summary<\/h3>\n\n\n\n<p>From October 15, an <strong>18% GST will apply to the MDR charged on eligible UPI transactions<\/strong>, not to the full payment amount. A \u20b910,000 payment with \u20b940 MDR will attract \u20b97.20 GST, while a \u20b95 MDR will attract 90 paise GST. Eligible GST-registered merchants can claim input tax credit, while consumers will not directly pay the GST.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.freepressjournal.in\/mumbai\/upi-mdr-debate-traders-divided-over-40-basis-point-charge-on-large-digital-payments-warn-of-cash-shift-and-tax-risks\">Image Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>An 18% Goods and Services Tax (GST) will apply to the Merchant Discount Rate (MDR) charged on eligible UPI transactions from October 15, 2026, government officials have clarified. The GST will not be calculated on the full value of a UPI payment. Instead, it will apply only to the MDR or processing fee charged to [&hellip;]<\/p>\n","protected":false},"author":30,"featured_media":1313968,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[272,7418],"class_list":["post-1313956","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-gst","tag-mdr"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Govt Imposes 18% GST On MDR For UPI Payments, From Oct 16 - Trak.in - Indian Business of Tech, Mobile &amp; Startups<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/trak.in\/stories\/govt-imposes-18-gst-on-mdr-for-upi-payments-from-oct-16\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Govt Imposes 18% GST On MDR For UPI Payments, From Oct 16 - Trak.in - Indian Business of Tech, Mobile &amp; Startups\" \/>\n<meta property=\"og:description\" content=\"An 18% Goods and Services Tax (GST) will apply to the Merchant Discount Rate (MDR) charged on eligible UPI transactions from October 15, 2026, government officials have clarified. 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